Chinese stocks down as markets reopen

Chinese mainland shares shrugged off the turmoil in global shares which occurred over the Lunar New Year holiday, with the Shanghai composite index.SSEC slipping just 0.6 percent.

Zeng said the impact could be temporary, however, as last week’s global sell-off was mainly driven by falling commodity prices and concerns about the impact on European banks.

Trends in January and February can also be distorted by the long Lunar New Year holidays, with business slowing down weeks ahead of time and many firms scaling back operations or closing.

Exports to the EU, China’s second biggest market, were down 12 per cent, according to data from the customs office, while China’s exports to the United States, its biggest market, fell 9.9 per cent in dollars in January from a year earlier.

Total social financing, another important indicator of China’s credit expansion, rose to 3.42 trillion yuan last month from 1.82 trillion yuan in December previous year.

The disappointing trade figures sparked some investors to raise more questions about the future of the yuan. Over the weekend China’s central bank chief blamed foreign speculators in part for volatility in the yuan currency and said there was no further basis for depreciation.

“As capital outflows continued, we believe that the PBOC will still need to lower the reserve requirement ratio (RRR) to permanently inject liquidity into the economy”, wrote ANZ economists in a research note, noting that a further cut in RRR was still possible in the first quarter.

Underscoring Beijing’s efforts to counter stagnant growth, data on Tuesday showed that Chinese banks extended a record 2.51 trillion yuan ($385.40 billion) of new loans in January, well above expectations, while growth in money supply quickened to a 19-month high.

Shanghai stocks have now tanked a whopping 23% so far this year.

Still, China is now posting its slowest annual growth in 25 years, raising questions about how quickly the country’s once red-hot economic engine is cooling off. Hong Kong’s Hang Seng gained 3.27 percent and ended up at 18198.14, Korean KOSPI climbed 1.47 percent and closed at 1862.20, Australian S&P/ASX200 gained 1.64 percent closed at 4843.46.

China has no incentive to depreciate the currency to boost net exports and there’s no direct link between the nation’s gross domestic product and its exchange rate, Zhou said.

China’s exports dropped 6.6 per cent year on year to 1.14 trillion yuan ($175 billion) in January while imports declined 14.4 per cent to 737.5 billion yuan, customs data showed on Monday.

The Chinese yuan is likely to keep appreciating and become a “safe-haven currency” amid global turbulence, a senior economist with China’s central bank has said, after recent strong performance of the yuan.

Investors were also buoyed by Premier Li Keqiang’s upbeat comments.