Moderate Rise in Stock Market Seen During First Day of Trading

Moderate Rise in Stock Market Seen During First Day of TradingDuring the first day of trading after a weeklong lunar new year saw a moderate rise in the Chinese stock market while turbulence was seen in the global market. The Shanghai Composite Index benchmark increased by .56 percent to 2,044.50 during closing Friday which erased earlier losses before the start of the Spring Festival.

Sectors ranging from media, culture, communications, aerospace and electronics technology led the rally. CHiNext Index also tracked China’s Nasdaq style board of growth enterprises was also up by 2 percent by the closing with a historic high of 1,526. The Chinese stock market experienced selling pressure just before the holidays that forced valuations to very low levels, also there were no major negative news on the liquidity or any other major aspects as China might see valuation correction this month.

Also the HSBC Purchasing Managers Index for China showed a record of 49.5 for January, the lowest level in six months in which analyst thinks could be the distortion caused by the lunar new year. Industrial and business activities might have slowed down and small enterprises sent migrant workers home a few weeks ahead of the holiday which resulted for a quieter activity for January compared with January and December 2013. Further examination of the available information that didn’t think of a notable growth slowdown is present.

The 2014 growth maintained its forecast at 7.6 percent and reiterates their view on the government to maintain a neutral monetary policy and at the same time execute a slightly provocative fiscal policy for 2014.  For short the government should consider lower inflation that might give the central bank more room in easing liquidity and at the same time tame interbank rates.

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