Hong Kong has long been locked in a battle with Asian peers such as Singapore and Shanghai for the title of the region
HONG KONG: The Chinese market climbed marginally on the last trading day of an otherwise bearish year, with investors expecting more government support in 2019.
At close, the Shanghai Composite index was up 0.4 percent at 2,493.90 points on Friday. The index is down 0.9 percent this week, down 3.5 percent in December, and lower by 0.9 percent in the fourth quarter.
The blue-chip CSI300 index was up 0.7 percent on Friday. It is down 0.6 percent for the week, down 5.1 percent in December, and lower by 12.5 percent this quarter.
The Shanghai index has lost 24.6 percent since the start of the year, while the CSI 300 index has weakened by 25.3 percent in the same period. The two indices have been in negative territory every month since September, and now sit
below their respective 50-day and 100-day moving averages.
On Friday, the CSI 300 financial sector sub-index was higher by 0.7 percent, the consumer staples sector rallied 2.9 percent, while the healthcare sub-index was up by 0.8 percent.
The smaller Shenzhen index was up 0.3 percent and the start-up board ChiNext Composite index added 0.2 percent.
Signs of greater government support are emerging. The People’s Bank of China abandoned the reference to deleveraging in a Thursday statement following the quarterly meeting of its monetary policy committee. It also dropped the word ‘neutral’ when describing monetary policy.
But there is limited room to loosen monetary policy, and investors are instead placing their hopes on a tax cut, as signalled by the country’s top leaders last week, to lift the economy and share prices in 2019, said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.
”The interest rate spread between China and the U.S. remains small. That’s why people think it (growth driver) will mainly come from tax cuts,” he said.
Also on Thursday, China’s banking and insurance regulator gave the green light for two major state-owned banks to set up their wealth management units.
The introduction of these wealth management companies, in conjunction with a looser monetary policy next year, implies that Chinese stock investors ”will no longer have to worry about liquidity” in 2019, Wei Yi, an analyst at Kaiyuan Securities, wrote in a memo on Friday.
Separately, China has approved five sets of railway projects in December, including a high-speed railway in Shaanxi province.
The latest approval came on Friday for the city of Changchun, which will build 71.1 billion yuan worth of railways, stretching 116 kilometres.
Reuters reported on Friday that China’s first set of refined fuel export quotas for 2019 will be 13 percent more than the first issue for 2018.
Although most analysts expect Chinese authorities to do more to support the economy next year, the scale of the stimulus remains in doubt, analysts at Minsheng Securities said in a note on Friday.
”Hopefully there will be a tax cut on a larger scale, infrastructure (spending) will rebound but there is limited room for that,” said the analysts. ”Real-estate policies will be implemented on a city-by-city basis.” At 07:00 GMT, the yuan was quoted at 6.8570 per U.S. dollar, 0.15 percent firmer than the previous close of 6.8675.
About 11.92 billion shares have traded so far on the Shanghai exchange, roughly 81.9 percent of the market’s 30-day moving average of 14.56 billion shares a day. The volume traded was 13.54 billion as of the last full trading day.
As of 07:00 GMT, China’s A-shares were trading at a premium of 18.85 percent over Hong Kong-listed H-shares. - Reuters
