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Hong Kong - Chinese stocks jumped the most in two months as weaker-than-estimated economic data fueled speculation of increased stimulus and industrial shares rallied on prospects of state-fund buying.
The Shanghai Composite Index rose 3.2% to 3 005.65 at 08:39, heading for its biggest gain since November 4. China Communications Construction and China Railway Group both surged by the daily limit.
Data on Tuesday showed China’s economic growth missed analysts’ estimates last quarter, while industrial production, retail sales and fixed-asset investment all slowed at the end of the year. The government may further ease monetary policy such as cutting interest rates or lenders’ reserve-requirement ratios, according to Northeast Securities and Central China Securities.
"There’s possibility of a cut in banks’ reserve-requirement ratios,” said Shen Zhengyang, a Shanghai-based analyst at Northeast Securities. "Railway and infrastructure companies are the main fulcrum for China to stabilize economic growth.”
China’s stocks have rebounded this week after entering a bear market on Friday amid concerns about the government’s ability to manage its economy and financial markets. Tuesday’s data showed the economy is growing at two speeds, with old rust- belt industries from steel to coal and cement in decline while consumption, services and technology do better.
Reorient Financial Markets says government-led funds may have entered to bolster the market, which was a typical occurrence on large down days during last year’s $5trn rout and has been more sporadic amid the recent bear-market slump.
“The national team may be stepping in to boost confidence,” said Steve Wang, research director and economist at Reorient Financial in Hong Kong. “The latest GDP data barely moved the market as it’s only slightly lower than consensus estimates.”
A gauge of industrial companies in the CSI 300 rose 4.8%, the most among the 10 industry groups. China Communications Construction jumped 10%, while China Railway Group also gained 10%.
China officially launched the $100bn Asian Infrastructure Investment Bank on Saturday with an opening ceremony attended by President Xi Jinping. The bank will boost infrastructure investment in Asia and improve integration, he said.
Monetary speculation
Gross domestic product rose 6.8% in the fourth quarter, less than the forecast for 6.9% growth. For the full year, GDP increased 6.9% - the least since 1990 - in line with the government’s target of about 7%. Industrial production rose 5.9% in December, compared with the 6% estimate of analysts.
Retail sales increased 11.1%, compared with the 11.3% forecast. Fixed- asset investment excluding rural areas expanded 10% last year, the weakest pace since 2000.
“The stock market jumped partly because of speculation China will introduce incentives such as interest-rate cuts or RRR cuts soon after it released GDP data this morning,” said Zhang Gang, analyst at Central China Securities in Shanghai.
The policy response to last year’s slowdown included accelerated monetary easing with six interest-rate cuts since late 2014 and increased fiscal spending.
The Hang Seng China Enterprises Index rose 2.4% in Hong Kong, while the Hang Seng Index advanced 1.4%. Trading volumes in Shanghai were 7% below the 30-day average for this time of day.
Traders reduced holdings of shares purchased with borrowed money for a 12th straight day on Monday, cutting the outstanding balance of margin debt on the Shanghai stock exchange to 584 billion yuan, a four-month low.
China’s securities regulator denied a Reuters report that its chairperson Xiao Gang offered to resign. Reuters reported that the chairman of the China Securities Regulatory Commission submitted his resignation last week, citing unidentified people. It wasn’t clear whether the government had accepted his offer, the news agency said.
