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China's Economy Stabilizes Modestly, Stimulus Hope Remains Alive

PART:
1 2 3 4
China's Economy Stabilizes Modestly, Stimulus Hope Remains Alive PART 1 OF 4

SSE Composite Index Rose, Chinese Government Bond Yields Fell

SSE Composite Index rose

The SSE Composite Index rose by 1.4% to 3,002.64 from August 3 to August 10. The Chinese government bond yield fell following the decline in global bond yields. As a result, stocks were the more attractive investment option. China’s benchmark ten-year government bond yields fell to a low of 2.7%, the lowest since 2009, due to sluggish economic growth and concerns about subdued inflation. China’s central bank is under pressure to unveil more monetary easing.

According to David Dai, investor director at Nanhai Fund Management, “Government bond yields are perceived as risk-free rates. If these yields fall, stocks with low valuations would become more attractive, especially those with high payout ratios.”

SSE Composite Index Rose, Chinese Government Bond Yields Fell

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Meanwhile, the SSE Composite Index was supported by gains in the financial sector. It was announced that five companies controlled by Guo Guangchang, the billionaire chairman of Fosun Group, acquired a combined 5.0% stake in New China Life Insurance.

Corporate earnings

Shares of Alibaba Group Holdings (BABA), China’s largest e-commerce company, rose after it reported strong revenue growth. Similarly, shares of JD.Com (JD), China’s online direct sales company, rose after it reported better-than-expected earnings.

Investment impact

From August 3 to August 10, mutual funds such as the Templeton China World Fund Class (TCWAX) and the Matthews China Fund – Investor Class (MCHFX) rose by 3.3% and 3.1%, respectively. Meanwhile, for the same period, the iShares MSCI China ETF (MCHI) and the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) rose by 3.0% and 1.6%, respectively.

The ADRs (American depositary receipts) of JD.com Inc, China Biologic Products (CBPO), and Alibaba Group Holdings rose by 7.7%, 5.3%, and 4.4%, respectively, for the same period.

In the next part, we’ll look at China’s export and import data.

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