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Chinese and Hong Kong stocks lead an Asian rally following sharp Fed-inspired losses in the region yesterday.
The Shanghai Composite Index jumps 2.7% amid speculation that the Chinese government will ease the ability of banks and property developers to raise money as part of an attempt to boost the stuttering economy, further evidence for which was provided in China's "Beige Book." One financing idea being bandied about is letting lenders sell preferred shares.
The yuan is steady following further sharp losses for the renminbi this week, with the USD-CNY -0.1% at 6.229 yuan.
Asian shares have mostly fallen as investors have seemed to grow more fearful about the significance of poor Chinese manufacturing PMI data yesterday.
Investors have sought safe havens such as the yen - the USD-JPY is -0.3% at ¥103 - helping to send the Nikkei -1.9%.
"A correction could occur," says investment strategist Shane Oliver. "We have to expect more volatility. Shares are no longer dirt cheap, meaning the easy gains are behind us."
The once place where the PMI data didn't seem to to have an effect today was China, whose Shanghai Composite rose 0.6%. Stocks were partly boosted by money market rates falling again following a $42B+ injection of cash this week from the central bank ahead of the Lunar New Year. The seven-day repo rate dropped 77 bps to 4.61%.
Chinese shares led Asian shares higher, with the Shanghai Composite rising 2.2% as stocks built on yesterday's gains following the injection of liquidity into money markets by the People's Bank of China in order to avert a cash crunch. The PBOC is expected to add more funds in operations tomorrow.
"The cyclicals and the blue chips are leading the rebound today, which usually points at policy relief," says analyst Cao Xuefeng. "It's more a relief rally at this point."
In Japan, the Nikkei rose 0.2% after the BOJ again maintained its ultra-loose monetary policy as is.
Having surged 153 bps yesterday, China's seven-day repurchase rate fell 88 bps to 5.44% today after the People's Bank of China injected over 255B yuan ($42B) into the financial system and expanded a loan facility in order to meet demand for cash ahead of the Lunar New Year.
The PBOC's action helped the Shanghai Composite rise 0.9% and the Hang Seng 0.5%.
Meanwhile, the shares of eight small companies jumped on their trading debuts today, prompting the Shenzhen Stock Exchange to warn about "blindly" speculating in IPOs. The stock moves highlight the demand for new listings following the end of a year-long moratorium on IPOs.
Asian shares are mainly lower as disappointing earnings results out the U.S. hurt sentiment.
China's Shanghai Composite closes -0.9% for its third weekly loss. Investors stayed cautious ahead of GDP and other economic next week, while a surge of 43% in the shares of debutant Neway Valve served to highlight concerns that an upcoming wave of offerings will divert money from other stocks. The industrial valve manufacturer is the first company to hold an IPO following the end of a year-long moratorium on new listings.
Elsewhere in Asia, Japan's Nikkei -0.1%, Hong Kong's Hang Seng +0.6% and India's Sensex is -1%.
Asian and European stocks mostly fall following Wall Street's sharp losses yesterday, while U.S. stock futures are flat-to-higher.
Earnings warnings in the U.S. are among the factors weighing on sentiment.
However, Chinese equities bucked the tape in Asia, rising 0.9% following four days of losses and after the Shanghai Composite traded at 10.1 times reported earnings yesterday, the lowest since at least 2007. The re-opening of the IPO market has been hurting the mood lately..
The Nikkei plummeted 3.2% during the first session of the week amid a strengthening of the yen over the long weekend. Elsewhere in Asia, Hong Kong -0.4%, India -0.5%.
EU Stoxx 50 -0.45%, London -0.4%, Paris -0.5%, Frankfurt -0.6%, Madrid -0.3%, Milan -0.35%.
U.S. stock futures: Dow flat. S&P +0.1%. Nasdaq flat.
Following an uncertain beginning, the Shanghai Composite has closed up 0.2% and ended a run of nine consecutive sessions of losses, its longest losing streak since 1994. The Hang Seng finished +0.6%.
Chinese shares rose despite another spike in short-term interest rates, which had hurt stocks last week. Even though the People's Bank of China provided a further emergency injection of money on Friday, the seven-day repurchase rate was 73 bps higher at 8.94% as of the midafternoon after touching 9.8% at one stage. That's the highest level since the liquidity crunch in June.
However, market watchers say that the increase in money market rates is due to seasonal factors, which might help account for the small recovery in stocks today.
Prior to its emergency provisions of liquidity, the PBOC had refrained from injecting money into the system as it looked - and still does - to rein in soaring debt in China. This has been highlighted by a state think tank that estimates that local-government loans have almost doubled to 19.9T yuan ($3.28T) in 2010-2012. Total central and local government debt was almost 28T yuan at the end of 2012, representing 53% of GDP.
Chinese stocks have closed down for the ninth consecutive session, the worst run since 1994, amid increasing fears of another cash crunch in the short-term money markets.
The seven-day repurchase rate soared 100 bps to a six-month high of 7.6%, representing a jump of 328 bps this week.
The spike came as borrowing remained difficult despite the People's Bank of China making an emergency cash injection in the financial system yesterday after being inactive for over two weeks. The PBOC didn't provide too many details, although the amount was reported to be 200B yuan ($32.9B).
"Market participants have to be able to see it and know the quantity and tenor of liquidity assistance in order to be reassured," says HSBC's Pin Ru Tan. "If they do not, it is natural to remain cautious.
The Shanghai composite fell 2% and the Hang Seng -0.2%.
The Shanghai Composite has closed +1.7% and the Hang Seng +1.65% after senior Chinese economic official Yang Weimin said the government had approved a 20,000-word document at the Third Plenum this week about reforms involving 15 sectors.
"Every sentence is reform, every word packs a punch," Yang said. The document "seizes onto the most deep-seated problems in reforming our country’s economic system."
Investors were disappointed earlier this week by the lack of details in the government's initial pronouncements about its reform agenda.
"While the [Plenum] communique may have disappointed some, it is normal practice for the post-event statement to cover only broad principles," a Barclays economist quoted by CNBC says, regarding investors' reaction to the conclusion of a four-day meeting at which China's leaders sketched a forward-looking plan for their country's economy.
Shares are nearly 2% lower in both Shanghai and Hong Kong as the 5000-word statement that followed the meeting struck analysts and investors as too vague and borderline contradictory.
Some expect a final document (called the "Decision Document") due out next week to provide more detail on specific reforms.
China's trade surplus more than doubled on month to $31.1B, which could increase pressure on the country to let the yuan appreciate further.
Exports to the EU +12.7% on year, to the U.S. +8.1%. The strong numbers are particularly surprising, as last year's figures are widely thought to have been over-reported.
"Combined with...better export data in Korea and Taiwan, China's export numbers suggests some — although not yet decisive — improvement in global demand momentum," says RBS economist Louis Kuijs. The import growth reflects "healthy expansion of demand" in China. (Previous)
The data comes ahead of a four-day meeting of China's leaders starting tomorrow, when they are set to discuss "comprehensive reforms" of the economy. These are expected to include the liberalization of interest and exchange rates, promoting competition, cutting red tape, strengthening the fiscal system and pushing innovation, and developing the service sector.
Ultimately, the government wants to reduce the economy's over-dependence on heavy industry, state investment and exports to one that is more reliant on private consumption and greater diversification. They're also looking to reduce the risks of the huge build-up in lending.
China's short-term money market rates have continued to climb even after the central bank yesterday injected 13B yuan ($2.13B) into the market in an effort to ease worries that it was planning a major tightening of policy.
The seven-day repo rate rose 64 bps to 5.59%.
However, analysts believe that the increase in rates is seasonal, and they aren't too worried that rates will spike to the extreme levels seen in June. They also reckon that the central bank will soon provide more cash for the markets.