China's Stock Market Surges Amid Government Measures to Spur Economic Growth

Strategic Insights -

China's Shanghai Composite Index surged to a six-year high as the government announced measures to boost lending and economic growth. The move comes as the world's second-largest economy faces a deepening slowdown. The Shanghai gauge gained 2 percent to 3,220.22, while the CSI 300 Index rose 1.8 percent.

Key Takeaways:

  • The Shanghai Composite Index climbed to its highest level since January 2010, with a gain of 6.2 percent in the last week of trading.
  • The People's Bank of China will include savings held by lenders for non-deposit-taking financial institutions into bank deposits from 2015, as reported by Xinhua.
  • Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. gained at least 3.4 percent in Hong Kong, while a gauge of financial shares in the mainland jumped to a six-year high.
  • PetroChina Co. led an advance for energy shares, climbing to a three-year high, as "expectations of loosening liquidity conditions may further boost market sentiment," according to China International Capital Corp. strategists.
  • China's H-shares gauge has risen 12 percent this year, while the Shanghai gauge has rallied 52 percent, with the H-shares valued at 7.9 times 12-month projected earnings, compared with 12.1 for Shanghai.
  • Trading volumes in Shanghai were 35 percent above the 30-day average for this time of day.
  • The PBOC will temporarily waive the reserve requirement for non-deposit-taking financial institutions' deposits, helping lower banks' loan-to-deposit ratio.
  • China's industrial profits fell the most in two years last month, with a 4.2 percent drop from a year earlier, as reported by the National Bureau of Statistics on December 27.
  • CICC has listed Ping An Insurance as a top pick, along with six other brokerages, with a median estimate of the H-shares gauge reaching 13,000 next year.
  • Citic Securities Co. plans to sell up to 1.5 billion shares, leading a jump of 9 percent in the brokerage's share price.

Statistics:

  • The Shanghai Composite Index has gained 6.2 percent in the last week of trading.
  • The Shanghai gauge advanced 2 percent to 3,220.22, while the CSI 300 Index gained 1.8 percent.
  • Industrial profits of China's industrial enterprises dropped 4.2 percent from a year earlier in November, according to the National Bureau of Statistics on December 27.
  • Trading volumes in Shanghai were 35 percent above the 30-day average for this time of day.
  • The H-shares gauge has risen 12 percent this year, while the Shanghai gauge has rallied 52 percent.
  • The H-shares gauge is valued at 7.9 times 12-month projected earnings, compared with 12.1 for Shanghai.

Sources:

  • Xinhua
  • Bloomberg
  • China International Capital Corp.
  • National Bureau of Statistics
  • Securities Journal
  • Plus Media Solutions Editorial