Chinese Stocks Showed Biggest Gain in Two Months Against Weak Economic Data
Chinese stocks rallied with the biggest gain in two months last Tuesday as the weaker than expected economic data sparked fresh expectation to get more government stimulus policies. Benchmark Shanghai Composite Index has gained 3.22 percent or close to 3007.74 points. Meanwhile the Shenzhen Component Index jumped 3.41 percent as start up index ChiNext increased by 3.07 percent. Stock rally came even with the Chinese economic growth slowed down to 6.9 percent last year, down from 7.3 percent the lowest in 25 years based on data that was released by National Bureau of Statistics.
Soft activity data, domestic market selloff and unsettled global financial markets is requiring marco policies to stay accommodating for a extended period of time as China’s industrial output slowed by 6.1 percent to its weakest level since the financial crisis as fixed assets investment have contrasted sharply by 10 percent. Weak economic data also sparked investors anticipation for further monetary easing that includes interest rate cuts and reduction of the reserve requirement ratio from banks to accommodate a slower economy.
The service sector is in a bright spot and is contributing more than half of the country’s total Gross Domestic Product growth or 50.5 percent and its for the first time in the country’s history. Experts believe that consumption growth remains in a bright spot as Chinese middle class consumption is upgrading but is likely to go moderate as wage growth and household income will slow down along with the rest of the Chinese economy.