Upon reports of weak yuan trade that will drive inflation rates, Chinese stocks were up during early Monday trading leading the stocks to hit an eleven month high. The rise in the stocks from Chinese markets was led on by forecasts that will bear positive effects on the exports of the country.
Despite hitting an eleven month high, the gains of the stock were suppressed slightly by worries that the greenback’s strength would be driven by Trump’s victory. The Hang Seng Index which has been declining for the past couple of weeks is also faced with Trump’s plans. Some of which is to increase the country’s investment on infrastructure to which he believes will boost U.S. interest rate and fuel inflation growth and rates.
By early Monday trading, top companies listed in the Hong Kong index rallied sharply with the blue-chip CSI300 index rising by 0.7% to 3,441.11 while the Shanghai Composite Index rose by 0.8% to 3,218.15. Both indexes jumped up to as much as 0.9% during early trading on Monday.
The Hang Seng index also posted 0.3% to 22.401.67 points while the Hong Kong China Enterprises Index posted a 1.2% gain to 9,461.58.
This is compared to the indexes’ impressive performance by as early as January this year failed to make it on the ChiNext which is China’s growth board posting a flat performance record.
Although the optimistic Chinese market recorded an eleven-month high during Monday’s early trading, stocks on IT and utility companies posted losses such as Coolpad Group Ltd. The wireless equipment manufacturer’s stocks then reported a drop in their stocks to a four-year decline. The drop in company stocks was led by a guidance that the company is expecting a loss of about HK$ 3 billion or 386.8 million US dollars for the current year. Defensive consumer stocks also posted some losses. Some of the stocks which posted gains meanwhile are the financial and infrastructure stocks.
The country’s weak currency also has been taken by investors in a positive way as a weak yuan could help the country’s exports and their infrastructure companies to other countries as well. The weak Yuan also raised concerns regarding the capital outflows and how a weak currency’s decreased the consumer’s power in raising the price of different goods and services.
The economy of China is on its way to recovery this according to Shanshan Finance head of equity trading Wu Kan. According to the head of the investment firm, the valuation in cyclical stocks has turned relatively low compared to growth shares making it an attractive offer for investors. Aside from the data supporting the claims that the economy of China is nearing stable levels, the bullish prices of different commodities also adds to the impression that the economy of the country is truly recovering.
Shenzhen Link To Lure Foreign Investors
Despite the delay in the access to the much awaited Shenzhen Stock Exchange which will give investors from Shenzhen access to markets from Hong Kong and vice-versa, investors from both parts of the connection are still looking forward to the new way buy cheaper growth stocks. This will also give them a chance to take advantage of the Yuan which has recently posted an eight-year low last Friday versus the dollar.
The upcoming Shenzhen Stock Exchange is set to give investors an access to China’s wide range of private companies including a list of technology, healthcare, and consumer stocks widely believed to be on the top of the country’s economy. Compared to the Shanghai link’s 567 stocks which can be accessed by foreign investors, the Shenzhen link will add another 880 to those already listed in Shanghai.
This will give China a bigger chance on getting an international audience with investors from all over the globe potentially flocking the link to be opened. Although the Shenzhen index is set to be show a higher price than the one in Shanghai, Shenzhen is expected to post higher growth rates even twice compared to Shanghai. This will attract more investors from outside the country given the access to top Shenzhen-listed companies. The Hong Kong - Shenzhen link has been reported to open by next week.