China’s Shanghai index up 3% since March 2022, CSI 1000 index rises 8% in biggest one-day jump
- The Shanghai Composite jumped 3.2 per cent in its biggest daily gain since March 2022. The trade volume was the highest since May last year.
Chinese stocks leapt to their largest one-day gain in two years on Tuesday and the yuan rose on a slew of signals that authorities are strengthening their resolve to support slumping markets. The Shanghai Composite jumped 3.2 per cent, in its biggest daily gain since March 2022. The trade volume was the highest since May last year.
The blue-chip CSI 300, climbed 3.5 per cent for its largest one-day rise since November 2022, and the small cap index (CSI1000I) notched its biggest rise since 2008. The rise in stocks comes after country's main indexes plunged to five-year lows in recent sessions on gloom about the sputtering economy and a lack of forceful policy stimulus measures.
Most of the surge in stocks happened when traders returned from markets' midday break having digested several helpful headlines. According to Bloomberg, Chinese President Xi Jinping will discuss the struggling stock market with financial regulators. Regulators also announced further curbs on short selling and state investors said they were expanding their stockbuying plans.
‘’China's stocks have been on a rollercoaster ride lately. I feel like the China indices have had a rough time recently, hitting five-year lows. The CSI300 Index dropped nearly five per cent last week, with signs of panic selling and forced liquidation of leveraged trades,'' said Trivesh D, COO at Tradejini.
‘’It's worth noting that China's GDP growth data for the fourth quarter was a bit disappointing. The growth momentum was flat despite an increase in government bond issuance and infrastructure investment,'' added the analyst.
Here are some of the key factors influencing Chinese stock markets:
-Analysts say that the recent gains in the indices came after Beijing took steps to stop the stock rout. They put in place trading curbs on certain investors and the sovereign wealth fund promised to increase holdings of exchange-traded funds (ETFs)).
-Another factor contributing to the sell-off in Chinese equity markets is the weakness in the economy. Following the market's recent sharp sell-off, the valuation of the entire market has dropped by seven trillion dollars since its peak in early 2021.
-Tensions with the US, a decline in real estate sales, and dismal economic data over the past few years have all contributed to this decline. The Chinese market's volatility and lack of transparency have driven international investors to seek more stable and predictable opportunities elsewhere.
-China local bodies too are facing high debt situation and finding difficulty in paying back the debt point out experts. The Structural headwinds being faced by China in addition to high debt levels are low employment and also an aging population that have further compounded the crisis.
Chinese stocks today
On the mainland, healthcare shares, opens new tab, up eight per cent, artificial intelligence shares, opens new tab, up 7.4 per cent, and new energy shares, opens new tab, up 6.3 per cent, were large gainers. Even previously freefalling small caps rose seven per cent.
In Hong Kong, the Hang Seng, rose four per cent for its biggest gain in six months and beaten-down stocks led the way, with the Hang Seng tech index, up 6.8 per cent in its biggest rise in more than a year.
The yuan , which has been underpinned by firmer-than-expected central bank guidance in recent days, was also on the rise, lifting from Monday's three-week low to 7.1865 per dollar.
US-listed shares of Chinese e-commerce firms Alibaba, JD.com and PDD Holdings, opens new tab rose between 4.4 per cent and 5.6 per cent in premarket trading on Tuesday, while the $4.09 billion iShares China large-cap ETF, opens new tab climbed nearly four per cent, according to Reuters.
Indian markets
Domestic equity benchmark indices, the Sensex and Nifty 50, ended in green on Tuesday's session led by information technology (IT), oil and gas stocks despite a dearth of fresh cues. After a lacklustre start, the domestic benchmark equity indexes rose on Tuesday, driven higher by IT firms on the increasing likelihood of a soft landing for the US economy.
Analysts predict that stock-specific, earnings-driven actions will likely impact the short-term direction of domestic stocks. The 30-share BSE Sensex ended higher by 454.67 points or 0.63 per cent at 72,186.09 level while the Nifty 50 closed at 21,929.40 level, up 157.70 points or 0.72 per cent.
‘’I think, on the other hand, India has witnessed record high’s being broken multiple times during the same time frame on account of increased political stability, outstanding corporate results, increased manufacturing activities and the ability to showcase India as an able and reliable replacement to the dependencies on China,'' said Trivesh D, COO at Tradejini.
India has seen a significant influx of foreign investment in 2023, with a total of $20 billion flowing into the country. India's $4 trillion stock market is a major draw for both domestic and foreign investors, as they look to capitalize on the country's rapid growth. Despite some concerns about overvalued shares and regulatory uncertainty, investors are flocking to India as a promising alternative to China,'' added the analyst.
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