China’s Yuan Declines as Imports Contract More Than Estimated

Japanese markets were closed for a holiday Monday.

China’s central bank expanded a scheme on Monday that increases banks’ ability to lend, boosting hopes of more measures to support the economy – lifting mainland Chinese shares to seven-week highs.

“The market has widely interpreted the move as China’s version of quantitative easing”, said Jacky Zhang, an analyst at BOC worldwide.

“Any signs of stimulus is being seized by the markets as a sign of stabilization and there is a few bargain hunting, especially in the beaten down sectors, related to commodities”, said Nicholas Yeo, head of equities (China/Hong Kong) at Aberdeen Asset Management with assets under management of US$490.8 billion globally.

And in Beijing’s latest attempt to prevent a repeat of the summer rout that knocked the market down roughly 40 per cent, China issued draft rules over the weekend to govern automated stock trading, which has been blamed in part for its role in the market tumult.

Impetus for further easing could come as soon as Tuesday, with the release of Chinese export data.

Overall, earnings are forecast to slide by 5.3 percent, compared with the same period a year ago, but much of that decline is due to a big slump in energy company profits. But “the rally is likely to fizzle out” as investors look to coming Chinese data and speeches from Fed officials, said Bernard Aw, market strategist at brokerage IG. “I would be cautious”.

“The market rebound was a correction of previous overly pessimistic sentiment as investors appeared to be convinced China’s economic reform and stimulus measures will continue”, said Li Xunlei, chief economist at Haitong Securities Co.

Japan’s Nikkei 225 fell 0.9 per cent to 18,266.67 and South Korea’s Kospi was down 0.2 per cent to 2,018.58.

An unexpectedly weak United States jobs report for September had led many investors to speculate that the Federal Reserve will not deliver its first hike since 2006 this year. Brent crude, used to price worldwide oils, fell $2.79 to $49.86 a barrel in London. It closed as high as $53.30 a barrel on Thursday, the highest level since July.

In currencies, the Malaysian ringgit started weakening against the USA dollar, after reaching its strongest level since August last week.

Prices in the USA also fell after the Organization of the Petroleum Exporting Countries reported that its output rose to a more-than-three-year high last month, pointing to supply glut. The dollar traded as high as 4.41 ringgit early Monday.

The Chinese yuan appreciated for the seventh consecutive day on Monday to 6.3406 per US dollar, hitting its highest level since August 12.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 percent in early deals, rounding off impressive 10 percent gains so far this month as investors unwound a few of their long US dollar and short commodities and emerging markets trade. The dollar hit as low as 6.3324 yuan Monday.