China Bull Starting to Run Again

After a weak start in 2020, shares are starting to rise in Shanghai.
KellyJan 12,2021,17:18

Investors may have expected a more exciting and lucrative start to China's equity markets, but so far the China bull has been slowed by profit-taking. Moving lower in two straight sessions, and sinking almost 45 points, or 1.2%. On Tuesday, however, The Shanghai Composite Index started to rise, up over 2.18% to around 3,608.

This is a good sign after what is considered to be an overbought Asian market going into the new year.

Asian markets finished broadly higher today. While China led the way, Hong Kong's Hang Seng is up 1.32% and Japan's Nikkei 225 is up 0.09%.

Behind the rise in optimism among Asian (and global) investors is President-elect Joe Biden’s promised economic stimulus plan.

According to a report by Pictet Wealth Management as cited by MarketWatch, investors in Asia have "found optimism in the prospect of further fiscal stimulus" under incoming President Biden.

The details of this promised stimulus package, which remain unknown, will no doubt have a significant impact on both Asian and U.S. investors.

On the other hand, the anti-China legislation enacted by Trump will have a residual effect. On Monday, Hong Kong's largest exchange-traded index fund suspended investment into Chinese companies blacklisted by the Trump administration.

Tracker Fund, holding $13.6 billion in its investment portfolio, must adhere to U.S. regulations as it is managed by the Asia unit of the Boston-based State Street Global Advisors. The move means the fund will no longer see the same gains as the Hang Seng Index, as reported by the South China Morning Post.

Over the weekend, a number of large U.S. investment banks including Morgan Stanley, JPMorgan, and Goldman Sachs removed their holdings of China Telecom Corp. Ltd. (HKEX: 0728), China Mobile Ltd (HKEX: 0941) and China Unicom Hong Kong Ltd. (HKEX: 0762).

China’s top telecoms were suspended from trading on the New York Stock Exchange on Monday as announced last week following Trump's ban on U.S. investment in companies allegedly owned or controlled by Chinese military.

Topics:china, stocks