Both the Hong Kong and mainland markets have shown strong upticks recently.
The Shanghai Composite Index staged a four-day rally after the National Day holiday, and retreated less than 1 percent on Wednesday. It rebounded again on Thursday, posting a rise of 2.32 percent.
Turnover at the Shanghai and Shenzhen markets recovered to 825.9 billion yuan (US$130 billion) on Thursday, a sign of improving market sentiment.
China’s M2, a broad measure of money supply that covers cash in circulation and all deposits, increased 13.1 percent year on year to 135.98 trillion yuan at the end of September. New yuan loans rose 144.3 billion yuan to 1.05 trillion yuan last month.
China’s total social financing, a measure of funds that non-financial firms and households get from the financial system, stood at 11.9 trillion yuan in the first nine months, down 579 billion yuan from a year earlier.
Meanwhile, yuan loans extended to the real economy rose 8.99 trillion yuan in the first nine months of this year.
These figures show that Beijing does not intend to loosen monetary policy excessively, but it does indicate that the authorities hope to stimulate growth by increasing loans to the private sector.
And so social financing tipped in favor of the real economy in the first three quarters, after a string of rate cuts and reserve requirement ratio reductions in the first half.
The government has approved more infrastructure projects to create investment opportunities for companies, apart from extending them more loans.
The National Development and Reform Commission, the nation’s top economic planning body, announced as many as eight infrastructure projects on Thursday, which will involve a total investment of 95.3 billon yuan.
These projects range from roads and bridge to railways and canals.
Given these moves, infrastructure stocks will become attractive in the last quarter.
Also, in a circular issued on Thursday, the State Council said it would push ahead with price reforms of water, oil, gas, electricity and transportation, in a bid to “basically liberalize” prices in competitive sectors by 2017.
The government intends to let market forces determine prices and set up an efficient system to supervise and prevent monopolies by 2020.
Leading companies like PetroChina (601857.CN) and Sinopec (600028.CN) will continue to benefit from the market-driven reform. Companies that consume huge volumes of energy will have more bargaining power.
Air China (601111.CN) said on Thursday that it expected its net profit to increase from 6.1 billion yuan to 6.3 billion yuan for the first three quarters, with annual growth rate rising from 92 percent to 100 percent.
Its glowing forecast is based on robust revenue growth as well as lower oil prices.
Meanwhile, Chinese President Xi Jinping will visit the United Kingdom next week.
The market will pay close attention to projects that will be announced during the visit. High-speed rail and nuclear plays will be much sought after.
British finance minister George Osborne said in September that China could build and own a nuclear power plant in Britain. That has given rise to market speculation that the two sides will sign a nuclear power deal during the visit.
On the back of strong domestic demand and global expansion, nuclear stocks have rosy prospects. Shanghai Mechanical and Electrical Industry Co. (600835.CN), Dongfang Electric Corp. (600875.CN) and China First Heavy Industries (601106.CN) all surged more than 3 percent on Thursday.
This article appeared in the Hong Kong Economic Journal on Oct. 16.
Translation by Julie Zhu
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