23 October 2016
China's logistics industry is expected to get a lot of attention in the 13th Five-Year Plan. Photo: CNSA
China's logistics industry is expected to get a lot of attention in the 13th Five-Year Plan. Photo: CNSA

Investors look to party plenum after cool response to rate cut

Stocks hardly budged on both sides of the border on Monday after China’s central bank slashed interest rates and banks’ reserve requirement ratio.

The People’s Bank of China (PBoC) made the announcement on Sunday, enough time for the market to digest the news.

And by clarifying that the move was not a quantitative easing (QE) measure, the PBoC helped ease market sentiment.

The PBoC said the rate cut is intended to reduce corporate borrowing costs and balance market liquidity.

Now investors are waiting for signals from the ongoing fifth plenum of the Communist Party central committee.

On Monday, the Shanghai Composite Index rose 0.5 percent to 3,429 points.

Combined turnover in Shanghai and Shenzhen was about 1.1 trillion yuan (US173.14 billion).

M2 supply rose 13.1 percent year on year in September, faster than the 12.2 percent increase reported in December 2014.

So even after the PBoC ruled out a western-style QE, money supply remained high.

The cuts are not expected to have any immediate impact on stocks and the economy which had both stabilized before the announcement was made.

With the party plenum relatively quiet, the property sector, which is among the first to benefit from a rate cut, underperformed the market on Monday. It fell 0.66 percent.

Feng Shubiao, deputy general manager of Yinhua Fund and ranked as one of the best fund managers by National Council for Social Security Fund, told Chinese media recently that four sectors are worth watching.

These are emerging new industries, sports services, high-end manufacturing and “China rising” concept stocks such as high-speed railway and nuclear power.

Also on Monday, the State Council released guidelines on the logistics industry which call for 800 billion yuan in revenue from the sector and 50 billion deliveries a year by 2020.

With the development of e-commerce, the logistics sector is expected to get a lot of attention, along with environmental protection plays, in the 13th Five-Year Plan.

These industries have huge potential in the coming five years.

Take Yangtze River Investment Industry (600119.SH), for instance.

The company is engaged in shipping, public information services and domestic express services.

Its network of road logistics trading centers is the only authorized public information platform by the Shanghai government.

It provides delivery services for many e-commerce platforms and is expected to benefit from related incentives and from a booming online shopping market.

This article appeared in the Hong Kong Economic Journal on Oct. 27.

Translation by Myssie You

[Chinese version中文版]

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a columnist at the Hong Kong Economic Journal

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