Shares in mainland China had their best week since the global financial crisis in 2008, with their main index adding more than 15 percent. Shares in Hong Kong recorded the strongest weekly growth since 1998. Measures to support the Chinese economy contribute to the favorable development. Moreover, analysts believe that growth is far from over.
The CSI 300 index, which includes the largest companies on the Shanghai and Shenzhen stock exchanges, strengthened by 4.47 percent today and closed at 3703.68 points. For the whole week, he has 15.7 percent to his credit. The Hang Seng index, which is the main indicator of the development of the stock market in Hong Kong, showed a growth of 3.55 percent to 20,632.30 points today. The profit for the whole week then reaches 13 percent.
“Based on historical valuation, we think Chinese stocks can show growth of another 20 percent,” said Invesco Asset Management analyst David Chao. So a 20 percent gain would be on top of this week’s high gains.
China’s central bank today cut interest rates and boosted the liquidity of the banking system. Beijing has taken a series of measures to support the economy as economic growth risks falling short of the government’s target of around five percent this year.
After studying the support measures, billionaire David Tepper said he was buying virtually everything he could buy in the Chinese stock market. “I thought what the US central bank (Fed) did last week would lead to monetary easing in China. But I didn’t know they were going to pull out such big guns,” Tepper said in an interview on CNBC.
Last week, the Fed lowered the key interest rate by half a percentage point to a range of 4.75 to 5.00 percent, which was a surprisingly significant change for some analysts. Until this month, the Fed kept the key rate at its highest level since 2001.
Today, China’s central bank also reduced the minimum reserve requirement, which is the amount of cash that banks must hold as a reserve, by 50 basis points. This will free up roughly a trillion yuan (about 3.2 trillion CZK). At the same time as this measure, the central bank reduced the seven-day repo rate by 0.2 percentage points to 1.50 percent.
The value of the Chinese stock market is now around 8.9 trillion dollars (roughly 200 trillion CZK). Over the past nearly four years, the CSI 300 index has weakened, placing it among the world’s worst-performing stock indicators. According to some analysts, this could now change.
Fresh statistics showed that the profits of industrial enterprises fell by 17.8 percent year-on-year in August. In July, they showed a year-on-year increase of 4.1 percent.
Measures to support economic growth in China are also having positive effects on some other markets in the region. The main index of Japanese shares, the Nikkei 225, gained 2.32 percent today and closed trading at 39,829.56 points. But in Australia, for example, stocks strengthened only marginally and weakened in South Korea.
Source: www.tyden.cz
