19 January 2011

The SSE 50 advanced by35.82 points or +2.09% closing at 1,750.52. Throughout the day\'s trade, the index shifted from 1,713.95to 1,757.25points. The SSE50 bounced back from yesterday\'s loss as China central bank adopted quantitative easing policy.

The rally of coal miners and metal producers is a signal of market retrieval; however the unmet hope of further easing of the monetary policy kept investors at bay as indicated by a shrinking turnover.

China Shenhua Energy Co, the nation\'s biggest coal producer, added 0.82 percent to 27.1 yuan. Jiangxi copper, the largest producer of the metal in China, jumped 2.28 percent to 25.6 yuan.

The People\'s Bank of China, the central bank, repurchased 183 billion yuan worth of bills from commercial banks, according to an announcement on its website.

To keep market liquidity at a reasonable level, the central bank usually repurchases bills from lenders every Tuesday and Thursday, but this week it bought bills also on Monday and Wednesday without revealing the actual sums.

Chinese enterprises are experiencing extreme difficulties amid economic slowdown. More liquidity can crop a short-term market rally. The market\'s long-term trend depends on the advance of economy.

Banks rallied till the trading close. Industrial and Commercial Bank of China, the nation\'s largest bank, advanced 1.16 percent to 4.36 yuan. China Merchants Bank jumped 1.44 percent to 12.70. Bank of China added 1.01 percent to 3.01 yuan.

During the Spring Festival, suspicions in overseas markets will bring mix-up to the A-share market. Volatility is unlikely to ease and the market will continue to oscillate before the holiday.



Macro-Economic updates:

Although China’s foreign trade volume surged by 22.5 percent from a year earlier to $3.64 trillion, the country’s trade surplus reduced by 14.5 percent to $155.14 billion in 2011, reduced by $183.1 billion in 2010 and by $196.07 billion in 2009. In 2011 while exports rose by 20.3 percent, imports grew by 24.9 percent.

The Entrepreneur Confidence Index of China, a gauge of macroeconomic prospects, fell to 122 in the last quarter of 2011compared with 129.4 in the third quarter, indicating lower optimism among business leaders. They fear that if the eurozone crisis deepens followed with a possible debt default by Greece, it is likely that China may face a trade deficit in 2012 as exports will fall sharply. Moreover, owing to declining property investment, productivity and exports the GDP growth rate of China for the first quarter of 2012 is likely to figure down to 6.4 percent, regaining in the fourth quarter around 7.3 percent.

Meanwhile, to strengthen China’s fiscal institutions to be more transparent and accountable the World Bank will release a series of recommendation due in February. The World Bank is likely to suggest China moves away from subsidized state owned enterprises and move towards deeper capital markets and more financial instruments, accompanied by high standards for disclosure.