Chinese shares began the week on a firmer note on Monday, extending gains from Friday after a rally in oil prices underpinned a rise in global equities.
The benchmark Shanghai Composite Index rose 0.6 percent in early trade, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.5 percent, building on gains of more than 1 percent on Friday as oil powered higher.
After surging 10 percent on Friday and helping Wall Street rise more than 2 percent, oil prices held their gains in Asia on Monday, with both Brent and US light crude trading above $32 a barrel.
Hao Hong, Managing Director-Research, BOCOM InternationalAs the (yuan) exchange rates calm after recent interventions, stocks are likely to stabilize, and can even stage a technical reprieve in the near term.
Recovering oil prices amid the epic (US) snow storm will also help, and non-commercial traders have already cut their bets.
China’s fickle markets have slumped about 16 percent so far this year on concerns about the slowing economy and confusion over the central bank’s foreign exchange policy, with thin trading volumes reflecting a lack of investor confidence and exaggerating the volatile moves.
China’s yuan was little changed in early trade, softening a touch to 6.5791 versus the dollar, from 6.5785 at Friday’s close, but it has still lost more than 1 percent so far this year.
Investors remain wary about further weakness in the yuan, despite assurances from Beijing that they have no intention of pushing it lower to gain a competitive advantage. The central bank has jolted global financial markets twice in six months by allowing sharp, sudden slides in the currency only to step in aggressively to stabilise it.
Financial markets need “clarity and certainty” about how Chinese authorities are managing their currency, Christine Lagarde, the managing director of the IMF, said on Saturday.
The decline in China’s yuan and stock markets on concerns about the country’s slowing growth have fuelled a flight of capital out of the world’s second-largest economy which policymakers are struggling to contain.
Japan reported on Monday that exports to China, its biggest trading partner, fell 8.6 percent in December from a year earlier, down for a fifth straight month, reflecting not only lower commodity prices but sluggish Chinese demand.
Other stock markets in Asia also rose on Monday, with Japan’s Nikkei nudging 0.1 percent higher and MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.9 percent, helped by expectations that global central banks, including the People’s Bank of China, will take ease monetary policy further if needed.
All eyes will be on the US Federal Reserve when it meets later this week to see whether it acknowledges concerns over the faltering Chinese outlook and global market turmoil that might slow its expected pace of interest rate increases.
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