China’s Stock Market Struggles
Mainland China’s stock market reopened on a flat note on Monday after a weeklong holiday, confounding expectations that stocks might be shaken by the latest move by Chinese authorities to tighten lending, while other major Asian indexes rose strongly.
Investors in mainland China sent the Shanghai Composite Index up a touch during the morning, and then slightly lower, effectively taking in stride monetary policy moves both at home and in the United States over the past week.
The index was down 0.1 percent by midday, shrugging off the Chinese central bank’s move just before the Lunar New Year holiday to further tighten lending by the country’s state-owned banks.
The timing of that announcement — it was the second time in a month that the People’s Bank of China raised the so-called reserve requirement ratio for banks — surprised many analysts. But it was widely interpreted as a continuation of Beijing’s efforts to rein in inflation. Previous tightening moves by the authorities have made investors jumpy, but the effect was limited on Monday.
“The fine-tuning of monetary policy to curb asset and consumer price inflation has imparted volatility to financial markets since August 2009,” analysts at ING wrote in a note on Monday. “We expect this state of affairs to continue.”
Elsewhere in the region, stock markets rallied as investors digested the implications of the U.S. Federal Reserve’s decision late on Thursday to raise the rate on loans made directly to banks.
That move, seen as a small step toward exiting the emergency stimulus measures implemented during the financial crisis, had shaken markets across the Asia-Pacific region on Friday — though investors in Europe and the United States later took a more positive view later on in Friday’s trading session. The main markets in Europe reversed early losses to end higher on Friday, and the Dow Jones industrial average finished Friday 0.1 percent higher.
By midday on Monday, the Nikkei 225 index in Japan was up 3.2 percent, reversing a 2.1 slump on Friday.
Shares in Toyota, which have slumped this year amid a massive vehicle recall at the car maker, gained 2.9 percent.
The main market gauges in Hong Kong and South Korea were more than 2 percent higher by late morning. The Straits Times index in Singapore rose 0.5 percent and the S.&P./ASX 200 in Australia was 1.6 percent higher.
The Taiex index in Taiwan, which was also closed all last week for the Lunar New Year holiday, reopened Monday with a 2 percent gain by late morning.
