20 October 2016
Stocks of lenders like Bank of Communications fell amid profit concerns. Photo: Xinhua
Stocks of lenders like Bank of Communications fell amid profit concerns. Photo: Xinhua

A-share market sluggish as govt data disappoints

With no market-moving news, mainland stocks remained in a correction mode. The Shanghai Composite Index was down 0.48 percent at 3,632 points on Thursday.

The heat was still there, however. The combined transaction volume was 1.23 trillion yuan (US$193 billion), up 90.3 billion yuan from the previous day.

New-energy vehicles outperformed. According to the latest official data, China produced 50,700 units of new energy cars in October, surpassing expectations with an eightfold year-on-year increase.

Among related stocks, Beijing Dynamic Power Co. Ltd. (600405.CN) rose by the 10 percent daily limit, Far East Smarter Energy Co. Ltd. (600869.CN) was up more than 5 percent, and Anhui Jianghuai Automobile Co. Ltd. (600418.CN) surged 3.3 percent.

Meanwhile, stocks in the nuclear and power generation sectors also rose. Rumors have it that a preliminary plan for nuclear energy development under the Five-Year Plan will soon be launched. And an official of the National Development and Reform Commission disclosed that implementation policies for the reform of electric power system will be unveiled.

China’s outstanding M2 money supply for October was 136.1 trillion yuan, up 13.5 percent from a year ago, data from the People’s Bank of China showed.

The growth was 0.4 percentage point higher than in September and 0.9 percentage point higher than a year ago. The modest growth suggests the central bank is being more prudent.

However, new loan growth for October was sluggish. This may be related to the lack of investment opportunities and high lending costs. More interest rate cuts are necessary to reduce lending costs.

The banks’ profitability is under great pressure amid narrowing interest spread and sluggish demand for new loans.

Most of the banking stocks fell on Thursday. Bank of Communications (601328.CN) and Shanghai Pudong Development Bank (600000.CN) performed the worst, with declines of over 2 percent.

The October data set is disappointing. They economy is struggling to regain its momentum. More stimuli should be launched.

NDRC data shows it approved 237 projects involving a combined investment of 1.9 trillion yuan. Recently approved projects include transportation infrastructure, water power and other public welfare projects.

Infrastructure is still China’s main method of boosting the economy. As government support for the sector continues, infrastructure stocks can maintain its steady growth.

The real economy is still facing headwinds. But as long as investors don’t lose heart, the market will maintain its upward trend with modest movements.

This article appeared in the Hong Kong Economic Journal on Nov. 13.

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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