SSE Composite Index fell
The SSE (Shanghai Stock Exchange) Composite Index fell by 8.1% from January 20 to January 27. It ended at 2,735.56 points. Crude oil prices fell below $30 on January 26. This led to a fall in major global stock markets. China’s economic slowdown resulted in capital outflows from the country. It also caused widespread fear that the yuan would depreciate more. This caused the SSE Composite Index fall.
China’s central bank injects money ahead of New Year holiday
The People’s Bank of China, through regular open-market operations, injected 440 billion yuan—or $67 billion—into the money market on January 26, ahead of the Lunar New Year holiday. The Lunar New Year is February 7–13. China’s financial markets and businesses are closed during this period.
At this time, the demand for money rises because people exchange cash and gifts. Companies give bonuses to their employees. Also, travel and shopping expenses rise due to the holiday.
FOMC policy meeting
The two-day Federal Open Market Committee meeting ended on January 27, 2016. The Fed left the interest rate unchanged at 0.25%–0.5%. This was widely expected due to the oil price rout, global slowdown, and equity market volatility.
Fed officials said that “Inflation is expected to remain low in the near-term, and the economy has slowed. However, the stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.”
Returns on China-focused mutual funds
Among the funds in this review, the John Hancock Greater China Opportunities Fund – Class A (JCOAX) posted the highest returns of 1.5% from January 20 to January 27.
For the same period, the Eaton Vance Greater China Growth Fund – Class A (EVCGX) rose by 1.4%. The Matthews China Fund – Investor Class (MCHFX) and the Clough China Fund – Class A (CHNAX) fell by 0.6% and 1.6%, respectively.
The returns of the Neuberger Berman Greater China Equity Fund – Class A (NCEAX) fell by 2.4%. It was the worst performer.
Despite oil prices falling below $30 per barrel, the shares of CNOOC (CEO) and China Petroleum & Chemical Corporation (SNP) rose by 10.0% and 8.1%, respectively, from January 20 to January 27. For the same period, Chinese companies’ American depository receipts including 58.com (WUBA), Alibaba Group Holdings (BABA), and Youku Toduo (YOKU) rose by 1.7%, 1.2%, and 0.2%, respectively.
In the next part, we’ll look at China’s industrial profits data.