CHINA’S SURPRISE 0.25% interest rate hike yesterday sent jitters through the A-share markets this morning.
But a flurry of buying activity, especially in banking and airline counters, edged the benchmark Shanghai Composite Index up 0.1% to close at 3,003.95, thanks in part to expectations of a strengthening local currency.
The index took a rollercoaster of a ride today, touching a daily low of 2,942.51 near the opening bell and hitting 3,041.15 shortly after lunch before settling at the 3.00 pm local time close just above the critical 3,000 mark.
Trading volume was once again extremely heavy, hitting 260 bln yuan today after achieving levels on Monday not witnessed in a decade.
Ironically, Monday’s massive volume was triggered by expectations that liquidity would remain healthy going forward.
Therefore, analysts polled in a Chinese language piece in SinaFinance said that yesterday’s Central Bank action coupled with today’s slight bourse uptick proves that the underlying fundamentals are still robust in China, and investors still expect the economy to perform well, higher interest rates notwithstanding.
Yesterday’s interest rate increase was the first in nearly three years, which helped lenders and insurers add to their share prices today and lifted the financial institution sub-index by 4.2% today.
China Merchants Bank Co Ltd (SHA: 600036) closed up 1.55% at 15.73 yuan.
Meanwhile, the country’s top two insurers also had a day to remember.
China Life (SHA: 601628) added 4.54% to close at 27.88 yuan while Ping An Insurance (Group) of China Ltd (SHA: 601318) rose 6.95% to 66.98 yuan.
Analysts also said that today’s index performance suggested that market players were generally unfazed by the risk of further rate action going forward.
China’s listed airlines also took flight once again as a stronger yuan currency makes aviation fuel and aircraft purchases more affordable on a relative basis.
China Eastern Airlines (SHA: 600115) added 2.16% to 8.97 yuan.
Domestic peer carriers China Southern (SHA: 600029) finished up 1.78% at 11.45 yuan, while Air China (SHA: 601111) added 1.81% to close the day at 15.79 yuan.
However, tighter liquidity was bad news for developers as property speculation thrives on easy credit.
Real estate stocks took a hit in trading today, helping drag the property sub-index down 3.5% on the day.
China Vanke (SZA: 000002), the country’s largest listed real estate firm, dropped 6.11% today to close at 8.92 yuan.
See earlier:
PROFIT TAKERS Finally Appear After 7 Day A-Share Bull Run
BULL RUN In China Has Analysts Abuzz As 3,000 Nears
Index Breaks 2,800 Mark With 2.5% Surge On Record Turnover
