Chinese stocks show positive movement as Japan's Nikkei Stock drops

April 12
7:27 AM 2016

Chinese stocks rose on Monday over the belief that lenient inflation data would promote policymakers to elevate the economic condition by additional financial easing. The benchmark Shanghai composite Index in China ended the trading session at 30333.96, an increase of 1.6%. However, Japan's Nikkei stock dropped by 0.4% as yen reached a new height over the dollar.

Market researchers and shareholders hope that Bank of China has many options including a possible interest rate cut to ease monetary policy while Japan's central bank lack adjustments tools as it has already moved to negative rates territory. THE WALL STREET JOURNAL quoted an official data, which stated that inflation rate in China increased 2.3% during March, lower than the government's forecast.

In addition, Ren Zeping, head of investment researcher's team at Guotai Junan Securities, commented that A-shares could rise 20% from their present mark and advised shareholders to purchase more. Ren's comment also propelled Chinese stock market. Meanwhile, brokerages also expanded sharply with Dongxing Securities rising 5% and Huatai Securities listed in Hong Kong index increasing 3.1%.

Selling in Japan market increased on fears that robust yen will adversely impact competitiveness among exporters in the country. Japanese yen reached ¥107.61 against a dollar earlier, indicating upcoming challenges that threaten policymakers to reverse the currency's course. Earlier, the bank reduced its interest rates into a minus territory hoping for a weak yen, but the move boosted the currency to nearly 10% since 2016 starting.

Producer prices in China rose 0.5% in March from the previous month, marking the first profit from September 2013. The hike in producer prices signifies the equilibrium in China's economy. Bloomberg quoted Wu Kan, JK Life Insurance's fund manager, who said, "The producer-price index number has delivered a signal that the economy is picking up and the consumer-price index is also acceptable as long as it doesn't accelerate too fast."

Hang Seng China Enterprises Index of Hong Kong improved 1.2% while the Hang Seng Index increased 0.4%, the straight fourth-day increase. Steelmakers like Xiamen Tungsten and Wuhan Iron & Steel increased by 10% daily limit and Baoshan Iron & Steel rose 6.4%.

However, investors are worried that the wavering inflation would halt monetary adjustment activities, following the steady rise of consumer price index in February. Meanwhile, the annual consumer price number in March remained flat at 2.3%. While wholesale prices decreased 4.3% in March, according to Reuters.

According to Zhu Bin, a market researcher at Southwest Securities, the consumer price index is below the expected level, motivating investors to look for an additional reforming activities in the financial policy. Among the business sectors in China, raw materials and energy stocks gained the major share in the market.

Brokerages like Sealand Securities jumped 6.5% while Citic Securities and Haitong Securities improved 2.7% and 2% respectively. Chinese firms are moving forward with an aim to stimulate their financial conditions amid weak global economy.

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