China Stocks Buck the Asia Pacific Equities Downtrend

China Stocks Buck the Asia Pacific Equities Downtrend

On 24 September 2012, the Financial Times reported that the Shanghai Composite Index edged up on hopes that the Chinese government would introduce stimulus measures. In the meantime, most Asian indices tracking the performance of Asia Pacific equities ended lower or flat with investors shifting their attention back to the global economic downturn and the never-ending Eurozone woes.

The FT reports that the Shanghai composite index, measuring mainland China stocks, increased by the modest 0.3 percent to 2,033.2, yet outperforming a 0.3 percent fall of the FTSE Asia Pacific, which reached 238.32. The upward movement, however, did completely offset the Shanghai Composite’s 2012 losses, which stand at 7.6 percent, compared to the 8.3 gain of the FTSE Asia Pacific index.

As noted in the FT article, among the stocks which supported the Shanghai index were China Life Insurance (NYSE:LFC, HKG:2628, SHA:601628), which was up by 1.9 percent, and China Pacific Insurance (SHA:601601, HKG:2601) that gained 2.7 percent.
!m[](/uploads/story/456/thumbs/pic1_inline.png)Bloomberg also reports that Shanghai Composite’s rally was due to speculation that regulators in Beijing are likely to introduce “concrete” measures to boost the stock market if the index falls below the 2,000 level, according to a recent report by the research company Shenyin & Wanguo Securities Co. In addition, Bloomberg quotes the Chinese newspaper Securities Daily as reporting that the China Securities Regulatory Commission (CSRC) will implement measures to raise the level of returns for investors in capital markets. China’s stock market has recently seen quite a few reforms associated with Guo Shuqing who became chairman of the CSRC in October 2011 and since then has been implementing various initiatives with the purpose of improving the market.

Unlike the Shanghai Composite, most Asian indices ended either lower or flat. The FT reports that investors shifted their focus back to the global economic slowdown and the ongoing debt problems in Europe, with the most recent issue being Spain’s perceived need for a bailout.
The FT quotes John Higgins, an economist at Capital Economics as saying that the recently observed equities rally was “looking tired”. Mr Higgins cautioned that risk appetite was likely to cool on account of escalation of the Eurozone debt crisis, and concerns about the US fiscal cliff, namely the upcoming expiry of the tax cuts introduced during the Bush era.

The Nikkei 225 index was down 0.5 percent to 9,069.29, with the downward movement fuelled by a stronger yen despite the Bank of Japan fresh stimulus measures, as well as by the growing tension between Japan and China over the Senkaku islands, with the dispute putting pressure on Japanese exporters. As reported by the FT, shares in Panasonic (TYO:6752) fell 2.9 percent, while Canon (TYO:7751) lost 3.9 percent. In the automotive sector, Mazda Motors (TYO:7261) fell 4 percent, and Nissan Motor (TYO:7201) was down 2.7 percent.
To complete the Asia Pacific equities downtrend, resource stocks in Sydney led the 0.5 percent decline on the S&P/ASX 200, leaving the gauge at 4,385.5, whereas Hong Kong’s Hang Seng index decreased by 0.2 percent to 20,694.7.

By Alice Young
Alice joined the Invezz team after motherhood convinced her to make a career change from actuary-ing. She brings a forensic eye for detail developed through crunching numbers on underwriting satellite insurance and the like.
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