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A-share markets on rebound following Trump trade truce

By SHI JING/ZHOU LANXU | China Daily | Updated: 2018-12-04 07:18
According to Shanghai-based information provider Wind Info, the food and beverages sector reported the biggest daily increase on Monday. [Photo/IC]

Multiple positive news reports over the weekend bolstered the Chinese A-share market, which has undergone months of decline.

The benchmark Shanghai Composite Index posted the biggest daily gain in a month and rebounded 2.57 percent to close at 2654.8 points on Monday, while the Shenzhen Component Index picked up 3.34 percent to close at 7938.47 points. China's Nasdaq-style board, the ChiNext Index, gained 3.26 percent to close at 1372.79 points.

Eased trade tensions between China and the United States is one major reason for the pickup in the confidence of A-share investors, according to Gao Ting, head of China strategy at UBS Securities.

President Xi Jinping and his United States counterpart, Donald Trump, agreed on Saturday to continue bilateral trade negotiations, hold off on the imposition of new tariffs and exchange visits at an appropriate time.

Gao said the market would respond positively to the latest agreement, with the sectors of electronics, telecommunications, aviation and papermaking projected to show the most significant growth. The consumption sector, which has been largely undervalued over the past few months, is forecast for an upswing, Gao said.

According to Shanghai-based information provider Wind Info, the food and beverages sector reported the biggest daily increase on Monday, 4.56 percent, followed by electronics, home appliances and telecommunications.

Yang Delong, chief economist at the Shenzhen-based First Seafront Fund, said that one of the major concerns plaguing the A-share market has now been eliminated. Therefore, investors' confidence will rise, as the recovery of the A-share market is projected to accelerate.

The China Financial Futures Exchange announced on Sunday a series of policy adjustments to take effect on Monday to revive the stock index futures market, including sharply cutting the margin requirements that represent trading costs.

Zhang Xia, chief strategy analyst at China Merchants Securities Co, said measures to revive stock index futures trading could buoy investor sentiment and introduce a large amount of capital into the A-share market.

"Investors with a low appetite for risk will now dare to enter the stock market, as stock index futures trading enables them to adopt hedging strategies that control investment risks at an acceptable level," he said.

In addition, the China Banking and Insurance Regulatory Commission said on Sunday that the wealth management subsidiaries of Chinese commercial banks will be able to invest in A shares directly. The market is expected to attract more inflow of capital, further boosting A shares, said Jiang Qijia, senior analyst at financial services provider Noah Holdings.

Hong Kong's Hang Seng Index closed at 27182.04 points on Monday, up 2.55 percent, while Japan's Nikkei 225 Index climbed 1.05 percent to close at 22586 points. The United Kingdom's FTSE 100 Index and Germany's DAX 30 Index both increased about 2 percent during the early trading hours on Monday.

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