18 October 2019
Online shopping has become a habit for many mainland Chinese. Photo: CNSA
Online shopping has become a habit for many mainland Chinese. Photo: CNSA

Take a break before new highs in the stock market

The Shanghai Composite Index corrected a little on Tuesday after gaining for four trading days.

However, the transaction volume remained above one trillion yuan (US$160 billion).

There has been no big change in the conditions fueling the rally, so the market may climb higher.

As pork prices continued to fall, the mainland’s consumer price index rose only 1.3 percent in October from a year earlier, slowing for a second month.

The producer price index fell 5.9 percent from a year earlier, dragged down mainly by the fall in the price of oil and related products.

Some analysts said China’s central bank may launch more easing measures before the US Federal Reserve raises interest rates.

We will have more clues about whether the economy will stabilize in the fourth quarter and the central bank’s next move after fixed investment and retail sales data are released Wednesday.

The official projection is that, after full implementation of the two-child policy, there will be 30 million more working people in China in 2050, which will lower the proportion of elderly people by 2 percentage points.

In short, the new policy will directly lead to increasing demand for homes, education, healthcare, housekeeping and daily necessities.

In the long run, the newly added young people will boost economic growth by 0.5 percentage point after they enter the workforce.

Mainland investors may have forgotten the pain of the turmoil in June and show a strong willingness to put their money into the market again.

Amid this market sentiment and based on the latest financial results, valuations for the brokers are still low.

It is a good time to invest in the sector.

However, President Xi Jinping mentioned Tuesday that the authorities should manage potential financial risks well and protect the interests of investors.

He also stressed the need to step up reform in state-owned enterprises, fiscal and tax schemes and the financial system.

While the reforms will take a longer time to be implemented, e-commerce companies in the mainland are ready for the annual Double 11 shopping festival Wednesday.

Companies that will benefit from the government’s “internet plus” policy are facing a much favorable market than that for green vehicles, which are welcomed by the government but not the market.

As netizens have established a habit of online shopping, the sector will have a brighter future.

This article appeared in the Hong Kong Economic Journal on Nov. 11.

Translation by Myssie You

[Chinese version中文版]

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a columnist at the Hong Kong Economic Journal