Tokyo shares open lower after Wall Street loss

TOKYO — Tokyo stocks opened down Monday after Wall Street slipped on weaker-than-expected US labour market data.

The benchmark Nikkei 225 index fell 0.97 percent, or 313.17 points, to 31,879.58 in early trade, while the broader Topix index lost 0.57 percent, or 12.88 points, to 2,261.75.

"The market is expected to start under pressure after the fall of US shares," online brokerage Monex said in a note.

Rapid, recent gains of Tokyo shares and the rise of the bond yields are also cause for concern, Rakuten Securities said.

New York shares ended lower on Friday after data showed that the United States added 187,000 jobs last month, below the market's expectation for 200,000.

But US unemployment fell, while hourly wages rose more than the market's expectations.

Global investors will turn their focus to inflation data, particularly of the United States, to gauge future moves on US interest rates, Stephen Innes of SPI Asset Management said.

"This week's intensively watched inflation data, particularly the US CPI, will need to show that the previous month's drop was not a one-time event; otherwise, more Fed action might be needed to control it," he wrote in a note.

The dollar stood at 141.65 yen, compared with 141.77 yen seen Friday in New York.

Among major shares, heavily weighted Fast Retailing lost 2.56 percent to 33,160 yen. Toyota gave up earlier gains and fell 0.43 percent to 2,427 yen. Sony Group lost 1.01 percent to 12,795 yen.

Advantest, a major producer of tests for chips, lost 4.04 percent to 18,185 yen.

High-tech investor SoftBank, which is due to release results this week along with a slew of other blue chips, fell 2.98 percent to 6,771 yen.

Leading steelmaker Nippon Steel rose 2.39 percent to 3,347 yen after it upgraded its earnings forecast. Gamemaker Nintendo rose 0.55 percent to 6,206 yen.

Agence France-Presse

Asian markets mixed after Wall St tumble as recession fears return

HONG KONG - Markets were mixed Thursday while oil prices fell and the dollar weakened after disappointing US data renewed worries about a recession in the world's biggest economy.

The optimism that has flowed through trading floors since the start of the year took a knock this week as concern about inflation and rising interest rates are replaced by growth fears and their impact on company profits.

The downbeat mood offset hopes that China's economy will enjoy a strong recovery this year -- having suffered its worst annual growth in 46 years in 2022 -- as it moves away from its zero-Covid policy.

All three main indexes on Wall Street sank more than one percent Wednesday in response to figures showing retail sales, and shrank at the quickest pace in more than a year, while producer prices fell the most since the beginning of the pandemic. 

Industrial production also came in worse than forecast.

While data indicating the economy was struggling has in recent months spurred equities on hopes it will allow the Federal Reserve to slow down its pace of rate hikes, analysts said traders are now concerned about the economic outlook.

"'Bad news is bad news' once again for markets, with weak retail sales and industrial production seeing risk assets sell-off," said National Australia Bank's Tapas Strickland.

The data "adds to the theme of the economy slowing and heading into recession in 2023, and pushes back on the soft landing narrative dominating markets since January".

Tokyo, Hong Kong, Singapore, Mumbai and Manila all fell, though Shanghai, Sydney, Seoul, Bangkok and Jakarta edged up.

Wellington's NZX 50 and the New Zealand dollar suffered only small losses despite Prime Minister Jacinda Ardern's shock announcement that she will step down next month, saying she no longer has "enough in the tank".

Expectations that US interest rates will not rise as much as previously feared weighed on the dollar, with the yen bouncing back strongly after Wednesday's Bank of Japan decision not to further tweak monetary policy.

However, several Federal Reserve officials have pushed back against such speculation, warning they will continue to tighten policy until they have brought inflation down from its multi-decade highs.

Worries about recession were also weighing on oil prices, despite hopes for a spike in demand as China reopens to the world. Both main contracts dropped around one percent in afternoon exchanges.

But SPI Asset Management's Stephen Innes said Asian investors could be in for a positive year.

"The clear message to start 2023 has been clear as a whistle: while last year was about Fed and ECB normalization, this year will be about China and Japan normalization, which should continue to drive Asia’s fortunes higher in 2023," he said in a note. 

Key figures around 0710 GMT 

Tokyo - Nikkei 225: DOWN 1.4 percent at 26,405.23 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 21,656.55

Shanghai - Composite: UP 0.5 percent at 3,240.28 (close)

Dollar/yen: DOWN at 127.84 yen from 128.80 yen on Wednesday

Euro/dollar: UP at $1.0805 from $1.0797 

Pound/dollar: DOWN at $1.2341 from $1.2344

Euro/pound: UP at 87.53 pence from 87.43 pence

West Texas Intermediate: DOWN 1.2 percent at $78.51 a barrel

Brent North Sea crude: DOWN 1.0 percent at $84.13 a barrel

New York - Dow: DOWN 1.8 percent at 33,296.96 (close)

London - FTSE 100: DOWN 0.3 percent at 7,830.70 (close) 

Agence France-Presse

Asian markets extend new year rally on China, Fed hopes

HONG KONG - Asian markets resumed their strong start to the year Monday, tracking a surge on Wall Street fuelled by optimism over China's reopening and hopes the Federal Reserve will slow its pace of interest rate hikes.

All three main indexes in New York soared more than two percent Friday after a closely watched report showed a forecast-busting rise in new jobs but a slowdown in wages growth.

That came as separate figures showed a shock contraction in the crucial services sector -- the first since spring 2020 at the height of the pandemic.

The readings, while suggesting the world's top economy was showing signs of weakness, were seized on by traders hopeful that the Fed will begin to temper its monetary tightening campaign.

Investors are now betting officials will lift borrowing costs about 25 basis points at their next meeting at the end of the month.

However, policymakers have warned that rates will continue to go up as they aim to bring decades-high inflation under control, with some saying they will not likely be cut until 2024.

In a further sign of hope, data Friday showed eurozone inflation slowed for a second month in a row in December, to 9.2 percent -- the first time in single digits since September.

"If Friday's price action tells us anything it's that investors really want to believe the peak inflation narrative that has helped support the rebound in equity markets that we've seen so far this year," said CMC Markets analyst Michael Hewson.

Asian equities started the day on the front foot, with Hong Kong sharply higher and Shanghai also well up.

Traders in the two cities have been on a high at the start of the year as they welcome China's emergence from zero-Covid as well as pledges to help the struggling economy, particularly the property sector.

The borders between Hong Kong, Macau and China were partially opened Sunday, providing a much-needed boost to Hong Kong. Macau-based casinos surged on the move.

"The U-turn in China's Covid policy is consequential to growth and equity returns," said SPI Asset Management's Stephen Innes.

"So with the lifting of border restrictions between China/Hong Kong/Macau and international travel reopening, local travellers are not only in a celebratory mood but also investors."

Sydney, Seoul, Singapore, Taipei, Manila, Mumbai, Bangkok and Wellington also enjoyed a strong start to the week. Tokyo was closed for a holiday.

London and Frankfurt rose at the open but Paris dipped.

Easing expectations about US rates were also weighing on the dollar, which extended Friday's retreat against its major peers.

Oil prices rose, having plunged around eight percent last week on demand concerns caused by a spike in Covid infections in China as containment measures are lifted.

However, while the commodity is now at more than a one-year low, observers say it could rally again as China reopens and the global economy recovers.

"I think oil will go upwards of $140 a barrel once Asia fully reopens, assuming there will be no more lockdowns," said hedge fund manager Pierre Andurand. He added that the "market is underestimating the scale of the demand boost that it will bring".

Key figures around 0820 GMT 

Hong Kong - Hang Seng Index: UP 1.9 percent at 21,388.34 (close)

Shanghai - Composite: UP 0.6 percent at 3,176.08 (close)

London - FTSE 100: UP 0.2 percent at 7,714.36

Tokyo - Nikkei 225: Closed for a holiday

Dollar/yen: DOWN at 132.00 yen from 132.13 yen on Friday

Euro/dollar: UP at $1.0690 from $1.0647 

Pound/dollar: UP at $1.2156 from $1.2095

Euro/pound: DOWN at 87.94 pence from 88.01 pence

West Texas Intermediate: UP 1.9 percent at $75.20 a barrel

Brent North Sea crude: UP 1.9 percent at $80.04 a barrel

New York - Dow: UP 2.1 percent at 33,630.61 (close)

-- Bloomberg News contributed to this story --

Agence France-Presse

Omicron panic pummels equities, oil

NEW YORK - Global equity and oil markets slumped Monday on investor panic over the impact of worldwide measures to contain the fast-spreading Omicron coronavirus variant, dealers said.

Asia tanked due to concerns over a fresh global surge in coronavirus infections, sparking a fierce renewed selloff in Europe, while Wall Street indices also closed lower.

Oil tumbled as traders fretted over how the latest Covid-19 strain might hit the world's appetite for energy, which has already suffered a heavy blow since the pandemic erupted early last year.

In New York, sentiment was jarred by a crucial moderate Democratic senator's announcement that he would not support President Joe Biden's social spending bill, imperiling the measure that some analysts view as a positive for US growth.

"It does not feel like the most wonderful time of the year for Wall Street," Oanda's Edward Moya said in a note.

OMICRON PANIC MODE

The British pound fell sharply after the surprise weekend departure of Prime Minister Boris Johnson's Brexit minister David Frost.

"After battling endless headwinds in recent weeks, markets have finally been knocked over as the rapid spread of Omicron finally reaches panic mode," said AJ Bell investment director Russ Mould.

Meanwhile, the EU's drug regulator approved a fifth Covid jab as the United States warned of a bleak winter with the Omicron variant spurring new waves of infections globally.

Since it was first reported in South Africa in November, Omicron has been identified in dozens of countries, prompting many to reimpose travel restrictions and other measures.

The Netherlands imposed a Christmas lockdown, and Germany tightened restrictions notably affecting the unvaccinated, while media speculation swirls over the re-imposition of tougher UK curbs.

STOLEN CHRISTMAS?

The rapid spread of Omicron has also slammed the oil market and travel stocks, since a return to containment measures and travel curbs would hit the aviation and tourism industries as well as dampen demand for fuel.

"There is some de-risking in the face of headline news that has market participants thinking the Omicron Grinch might steal Christmas after all," said analyst Patrick J. O'Hare at Briefing.com.

With traders beginning to wind down ahead of the festive season, analysts said trade was thinner and markets more susceptible to swings, but the mood has become increasingly glum as central banks start paring their huge financial support to fight inflation.

World markets had briefly risen last week after other major central banks took action to combat soaring inflation, even as spiking Covid-19 cases threaten the fragile economic recovery.

The Bank of England delivered the first interest rate hike in three years, while the Federal Reserve said it would speed up the taper of its bond-buying program and indicated three interest rate hikes before the end of 2022.

Dealers were unmoved Monday by news that China had trimmed a key interest rate by five basis points as it looks to reignite the stuttering economy.

Meanwhile, in Chile, the Santiago stock market plunged almost seven percent at the opening bell after leftist Gabriel Boric decisively won the presidential election, with the Chilean peso also taking a beating.

Agence France-Presse

Wall Street tilts higher again on economic recovery hopes

NEW YORK (AP) — Wall Street’s rally is spilling into a new week as most stocks continue to ride the high supplied by Friday’s surprisingly encouraging report on the U.S. jobs market.

The S&P 500 was up 0.5% in midday trading on Monday, bringing it back within 5.3% of its record set in February, as optimism strengthens that the worst of the coronavirus-induced recession may have already passed. Stocks that would benefit most from an economy that’s growing again were rising the most, but pullbacks for a handful of big tech stalwarts were keeping the market’s overall gains in check.

The Dow Jones Industrial Average was up 248 points, or 0.9%, at 27,359, as of 11:53 a.m. Eastern time, and the Nasdaq composite was up 0.2%.

Stocks have been rising since late March, at first on relief after the Federal Reserve and Capitol Hill pledged to support the economy and more recently on hopes that the recovery may happen more quickly than forecast.

IMPACT ON THE ECONOMY:

– Survey: Business economists expect worst slump since 1940s
– BP to cut 10,000 jobs worldwide amid virus pandemic
– Left out: More workers now losing hope of getting back jobs

Such hopes got a huge boost Friday when the U.S. government said that employers added 2.5 million jobs to their payrolls last month. Economists were expecting to see 8 million more lost.

States across the country are slowly relaxing restrictions on businesses meant to slow the spread of the coronavirus outbreak, which is raising expectations that the economy can pull out of its coma. New York City began reopening on Monday, for example, allowing construction and “nonessential” retailers to start operating again with some restrictions.

That puts more pressure on economic reports this week to confirm that Friday’s jobs report was a true inflection point and not just an aberration.

Even if the economy did hit its bottom a month or two, economists warn that many risks are still looming over a very long road back to full recovery, such as a flareup in U.S.-China tensions. Critics are also still saying the stock market may have risen too quickly and may be setting investors up for disappointment, with the biggest risk being another wave of infections that leads to more lockdowns.

It’s still unclear whether the economy can recover anywhere near as quickly as the stock market, which has rallied sharply after earlier being down nearly 34% from its February record.

“There’s a lot of risk that businesses and the economy don’t recover as fast,” said Tom Martin, senior portfolio manager at Globalt Investments. “When money starts running out in July, are we enough on a path to getting people employed and businesses open?”

Among this week’s economic highlights are reports on inflation and the number of workers applying for jobless benefits. The headliner, though, is likely the Federal Reserve’s meeting on interest rates in the middle of the week.

Full Coverage: Financial markets
The Fed has already promised unprecedented amounts of support to keep markets running smoothly, but will the recent upturn in job growth mean it will pull back at all?

Treasury yields have been climbing in recent days, reflecting rising expectations in the market for the economy and inflation. The 10-year Treasury yield dipped to 0.86% from 0.90% late Friday, but it’s up sharply from 0.66% a week earlier.

Too quick a rise in yields could slow spending and the anticipated economic recovery, though. It can also be a heavy weight on the stock market.

Higher yields make bonds more attractive as investments, which would pull some investors’ dollars away from stocks. High-dividend stocks would likely get hurt in particular, because some income investors had turned to them instead of bonds when yields were lower.

Stocks that would benefit most from a growing economy, meanwhile, were leading the market on Monday to continue their recent trend.

Energy producers, banks and industrial companies were leading the S&P 500, and more than 70% of the stocks in the index were higher.

Travel-related stocks were again notable standouts as investors raised expectations for a reopening economy. Norwegian Cruise Line, Carnival, Alaska Air Group and United Airlines all rose more than 8.5%.

Smaller company stocks also climbed more than the rest of the market, which often happens when expectations for the economy are rising. The Russell 2000 index of small-cap stocks was up 1.4%.

But several titans were giving back a portion of their gains made earlier this year, when investors were piling into the few companies that could hold up in a weak, stay-at-home economy. Microsoft slipped 0.4%, Apple slipped 0.3% and Netflix lost 2.1%. These are some of the biggest companies in the market, which gives their movements more sway over the S&P 500 and other indexes.

In global markets, Japan’s Nikkei 225 index jumped 1.4% after the government reported the economy contracted at a 2.2% annual rate in the January-March quarter, better than the initially estimated minus 3.4%.

Indexes in other countries were more subdued. The Kospi in South Korea was up 0.1%, while the Hang Seng in Hong Kong was virtually flat.

France’s CAC 40 was down 0.4%, Germany’s DAX lost 0.2% and the FTSE 100 in London was down 0.2%.

Oil was down, even after major oil producing nations agreed over the weekend to extend a production cut of nearly 10 million barrels of oil a day through the end of July to counter the blow to demand from the coronavirus pandemic.

Oil had already climbed last week on anticipation of the move, and OPEC officials did not commit to extending the cuts past July or establishing a way to enforce the production limits.

U.S. crude for July delivery fell 3.6% to $38.13 per barrel. Brent crude, the international standard, fell 3.3% to $40.90 per barrel.

___

AP Business Writer Elaine Kurtenbach contributed.

The Associated Press

Stock markets mixed as China-US tensions return to fore

Equities were mixed Wednesday as profit-taking and worries about deteriorating China-US relations were weighed against optimism over the gradual reopening of economies around the world.

Hong Kong extended losses as police fired pepper-ball rounds as anti-China protesters took to the city's streets, with investors fearing the demonstrations could erupt into the worst unrest since last summer.

The broad trend across global markets has been upward for weeks as virus deaths and infections ease in most countries and governments begin to reopen their battered economies, fanning hopes for a recovery in the second half of the year.

Confidence has also come from mind-boggling amounts of stimulus and central bank pledges of support, with the latest coming from the eurozone, where European Commission President Ursula von der Leyen is due to unveil a trillion-euro revival plan for the bloc.

However, there was little fresh desire for risk assets with eyes on the simmering row between the world's top two economies, fuelled by Donald Trump's barracking of China over its role in the pandemic, and made worse this week by Beijing looking to tighten its grip on Hong Kong.

The financial hub was thrown back into the spotlight Friday when Chinese officials proposed a controversial security law that many fear could ring the death knell for the city.

And Trump appeared to agree, with his press secretary Kayleigh McEnany telling a briefing he had said it is "hard to see how Hong Kong can remain a financial hub if China takes over".

Washington has already said it could terminate its preferential trading status over the issue.

Markets are also fretting over reports that the US has warned it will impose sanctions on Chinese entities and officials if it goes ahead with the law.

While China and Hong Kong leader Carrie Lam have sought to ease worries about the extent of the law plans, Jeffrey Halley at OANDA warned that no matter how they try to dress it up "the passage of the security legislation from Beijing will have consequences for the beleaguered (city) and will further darken relations between the US and China."

Concerns about the growing crisis have weighed on the yuan, losing almost three percent this year, with observers suggesting it could hit a record low.

- Hong Kong protest worries -

Meanwhile, there are concerns about another flare-up in the city as lawmakers prepare to discuss a law that bans insulting China's national anthem.

Seven months of sometimes violent demonstrations last year hammered the local economy and raised questions about its future.

Hong Kong fell 0.4 percent, Shanghai lost 0.3 percent and Sydney fell 0.1 percent, while Kuala Lumpur dropped more than one percent as Malaysia struggled to contain its virus. There were also losses in Jakarta, Bangkok and Singapore.

But Tokyo, Mumbai, Manila, Seoul, Taipei and Wellington saw gains.

In early trade, London, Paris and Frankfurt were all higher. The gains in Paris as dealers brushed off a warning from officials that France's economy could contract 20 percent in the second quarter.

Still, National Australia Bank's Tapas Strickland, said in a note: "Risk sentiment continues to surge as activity lifts following the gradual easing of containment restrictions around the world, while vaccine hopes remain high with 10 different vaccines currently at the human trial stage."

He also cited comments from Federal Reserve official James Bullard that the third quarter "very likely, right behind the worst quarter, will be the best quarter of all time on the growth perspective".

Wall Street, where the New York Stock Exchange trading floor reopened after two months of closure, finished higher, with the Dow gaining 2.2 percent.

Oil markets slipped on China-US tensions, and after reports said Russia could begin easing up on its supply cuts in July.

Massive reductions by Moscow and other major producers including Saudi Arabia have helped fuel a surge in prices over the past month, with WTI doubling since the end of April.

But analysts said the commodity will likely continue to win support from the easing of lockdowns, which is expected to boost demand as people get back on the road.

- Key figures at around 0810 GMT -

Tokyo - Nikkei 225: UP 0.7 at 21,419.23 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 23,301.36 (close)

Shanghai - Composite: DOWN 0.3 percent at 2,836.80 (close)

London - FTSE 100: UP 0.7 percent at 6,112.97

Euro/dollar: DOWN at $1.0954 from $1.0984 at 2040 GMT Friday

Dollar/yen: UP at 107.51 yen from 107.54 yen

Pound/dollar: DOWN at $1.2292 from $1.2335

Euro/pound: DOWN at 89.11 pence from 89.04 pence

West Texas Intermediate: DOWN 2.3 percent at $33.55 per barrel

Brent North Sea crude: DOWN 2.2 percent at $35.37 per barrel

New York - Dow: UP 2.2 percent at 24,995.11 (close)

Agence France-Presse

Asian markets gain as China closes down for Lunar New Year

BANGKOK — Shares were mostly higher in quiet trading on Friday in Asia as China began a week-long Lunar New Year festival that is being overshadowed by the outbreak of a new virus that has killed 25 people and sickened more than 800.

Japan’s Nikkei 225 index rose less than 0.1% to 23,811.54 and in Hong Kong the Hang Seng gained 0.2% to 27,949.64.


Australia’s S&P ASX/200 picked up 0.2% to 7,100.30 and the Sensex in India also rose 0.2%, to 41,473.97.

Markets were closed in Shanghai and the rest of mainland China, South Korea, Malaysia and Taiwan.

As authorities confirmed more cases of the new virus first reported in the central Chinese city of Wuhan, investors continued to monitor developments in the international effort to keep it from spreading further and potentially harming the global economy.

The World Health Organization decided Thursday against declaring the outbreak a global emergency for now.

Such a declaration could increase resources for battling the outbreak but also result in trade and travel restrictions and other economic damage.

Fears that the coronavirus could spread have weighed on global markets this week, driving up demand for U.S. government bonds and safe-play stocks.

Market “traders are weighing the anticipated China growth fallout against the backdrop of the current global growth recovery. While the calculus is not coming up roses, it’s far from a state of global market panic,” Stephen Innes of AxiCorp said in a commentary.

“Still, if risk aversion starts to spread beyond China’s borders and starts to affect more than the usual suspect’s luxury, travel, and tourism, then we will likely see a more significant dive in the broader global indices,” he said.

Major U.S. stock indexes closed mostly higher Thursday, as gains in technology and industrial companies offset declines elsewhere in the market.


The S&P 500 notched a small gain for the second straight day, climbing 0.1% to 3,325.54, while a modest pickup nudged the Nasdaq composite to an all-time high of 9,402.48, up 0.2%.

The Dow Jones Industrial Average edged 0.1% lower to 29,160.09, its third straight day of losses as the benchmark was weighed down by a steep drop in shares of Travelers Cos.

The Russell 2000 index of smaller company stocks rose less than 0.1%, to 1,685.01.

Traders also had their eye on a mixed batch of company earnings reports, including encouraging quarterly results from American Airlines and Citrix Systems, and disappointing report cards from Travelers and Raymond James Financial.

“Today was driven a bit by earnings, but also by the coronavirus fears,” said J.J. Kinahan, chief strategist with TD Ameritrade. “Asian markets had a really tough night and that was our lead-in, that put a bit of extra pressure on the market coming in.”
Excluding the Nasdaq, the major U.S. stock indexes are on track to end the week with a loss.

Bond prices rose, pulling the yield on the 10-year Treasury lower to 1.73% from 1.77% late Wednesday.

Benchmark crude oil gained 14 cents to $55.73 per barrel in electronic trading on the New York Mercantile Exchange. It fell $1.15 to settle at $55.59 a barrel on Thursday. Brent crude oil, the international standard, picked up 18 cents to $62.22 per barrel. It dropped $1.17 to close at $62.04 a barrel overnight.

Gold fell back, losing $4.30 to $1,561.10. Silver shed 3 cents to $17.80 per ounce and copper fell 4 cents to $2.73 per pound.
The dollar rose to 109.52 Japanese yen from 109.49 yen on Thursday. The euro weakened to $1.1053 from $1.1056.

source: business.inquirer.net

China stock markets among world’s worst in 2016

SHANGHAI, China — China is the world’s second-largest economy and has one of the fastest growth rates of any G20 nation, but its stock markets have been among the worst performing in the world this year.

Starting with a botched attempt to reduce volatility that instead triggered a spectacular meltdown, Chinese bourses have spent the year struggling against feckless policymakers, massive capital flight and a languishing currency.

The benchmark Shanghai Composite Index (SCI) struggled towards the finish line Thursday down 12.5 percent for the year, compared to falls of 0.6 percent by the Hang Seng Index in Hong Kong and 2.2 percent for Japan’s Nikkei 300. Both markets are trading Friday.

As of Thursday, it had the worst showing among the 40-plus countries tracked by Wall Street Journal’s Market Data Center, behind even debt-ridden Portugal.

It is a significantly worse performance than 2015’s wild ride, when the SCI surged by 60 percent in the first half before plunging by more than 40 percent in under three months. Even so, it finished the year with an overall gain of 9.4 percent.

Then authorities brought in a “circuit breaker” mechanism in January to automatically shut down trading if prices plunged. It went into effect twice in one week, kicking off a self-reinforcing selling panic that spread to global markets, and was scrapped after just four days.

“The Chinese market had a meltdown this year, and so far it has only half recovered from that,” Northeast Securities analyst Shen Zhengyang told AFP, adding the market was still in “slow and gradual restoration”.

The chairman of the China Securities Regulatory Commission was sacked over the debacle.

His replacement, Liu Shiyu, has kept a low profile, hurting market confidence and leaving investors seeking direction, said Oliver Rui, a professor at the China Europe International Business School (CEIBS).

“People don’t understand much about the regulator’s policy direction,” he said, adding that the lack of clarity partly explained the market’s weak performance.

The falling yuan — lowered seven percent by the central bank over the year in the face of a surging dollar — has also driven investors abroad in search of better performance.

“When the yuan falls, market capital runs off overseas to hedge the risks,” said Dickie Wong, Hong Kong-based research director for Kingston Securities, adding it also made foreign investors “less optimistic about mainland companies”.

Missed connection

Even the year’s few bright spots have failed to live up to expectations.

Earlier this month, China launched a long-delayed programme connecting its second exchange in Shenzhen — which has lost 14.8 percent so far this year — with the bourse in Hong Kong.

The Hong Kong-Shenzhen Stock Connect builds on a similar scheme with Shanghai and gives foreign investors access to many mainland tech shares.

But it has so far failed to live up to the hype, with Shenzhen’s shares more expensive than those in Hong Kong, making it unattractive to foreign investors, while the entry threshold for mainlanders to buy Hong Kong shares was set as high as half a million yuan ($72,000).

Other anticipated reforms, such as a new system for initial public offerings (IPOs), have all failed to materialise or were quietly shelved after January’s drama.

Currently, the Chinese government — rather than the market — decides which companies offer shares and when, and at what price.

As a result Chinese flotations are always underpriced, which “sends the wrong signals to the market”, according to Oliver Rui of CEIBS.

Authorities should “not intervene too much” but “are always afraid that the market will lose control”, he told AFP.

“But if you do not let go, then you will never know if the market can accept the new system or not. Mistakes are a necessary step.”

‘Least profitable’

Unlike most global exchanges where institutions hold sway, China’s stock markets are dominated by small investors, heightening volatility and short-termism.

Government-backed funds injected billions of dollars into China’s markets in 2015 in an effort to stop them bleeding out, and still play a major role, ignoring profit, loss and everything in between, and creating huge price distortions.

“In such an environment, it’s quite difficult for investors to apply whatever money-making strategies that they have learned over the years,” said Citic Securities analyst Zhang Qun.

He called China’s stock market “the least profitable” option in China or abroad.

Even so, brokers are mildly optimistic about next year — but hedge their bets with huge ranges for their 2017 year-end forecasts.

China Merchant Securities projects the SCI at anything from 2,900 — a six percent decline — to 3,800, which would represent a leap of 23 percent.

“With the government taking tighter controls over the property market and bonds also falling, not many choices are left,” said Kingston’s Dickie Wong. “Funds must go somewhere and stocks are ultimately one choice.” CBB

source: business.inquirer.net