Chinese shares hold onto gains on economic measures

by Jonathan Adams

The Shanghai composite index advanced 1% and is 4.7% higher for the week, while China’s blue-chips index was up 0.2% and is headed for a weekly gain of 5.4%

Chinese shares managed to hold onto weekly gains on Thursday as Beijing rolled out a string of measures to boost market sentiment ahead of a week-long holiday, while the Nikkei reached new heights after the Bank of Japan ruled out rapid rate hikes.

In Asia, Japan’s Nikkei soared 2.1% to end at its highest level in 34 years, helped by a 10% rise in SoftBank Group after key holding Arm forecast sales and profit surpassing the market’s expectations.

The Japanese yen slid 0.3% to 148.63 per dollar and 10-year yields came off early highs to 0.695% as BoJ Deputy Governor Shinichi Uchida said the central bank is unlikely to raise interest rates aggressively, even after ending negative rates.

Elsewhere, share markets mostly were higher but Hong Kong’s Hang Seng was an exception, 1.3% lower, and dragged MSCI’s broadest index of Asia-Pacific shares outside Japan 0.3% lower.

Shares of Alibaba dropped 6.6% as its Q3 revenue missed estimates.

China’s mainland shares managed to hold onto gains this week before the week-long Lunar New Year holiday starts on Friday.

The Shanghai composite index advanced 1% and is 4.7% higher for the week, the biggest gain since early November, while China’s blue-chips index was up 0.2% and is headed for a weekly gain of 5.4%.

Investors have taken leadership change at the top of China’s market regulator, announced on Wednesday, as another sign that authorities are taking note of the pain.

Separately, data on Thursday showed China’s consumer price index dropped 0.8% in January from a year earlier, the biggest decline since 2009, although on a monthly basis, consumer price index increased 0.3%, picking up from the previous month.

Tommy Xie, head of Greater China research at OCBC, said the decline was primarily driven by the negative base effect of the Lunar New Year falling in February this year, adding that he expects CPI to grow more than 0.5% y/y this month.

He added: As the base effect diminishes in the second quarter and with the implementation of appropriate policy support, the barrier for CPI to return to negative territory is expected to rise.

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