The Shanghai has put in its best two day performance since September ’09, rising 5.8 percent. After its post crash peak in August 2009, Chinese stocks have fallen almost 40 percent before hitting their lows last Friday.
Expectations of monetary easing before the Chinese New Year (January 23rd) and news that the government might loosen regulations in the A-share market has bounced the market. The China Daily writes,
It was reported that the regulator has approved US bank Citigroup Inc to set up a joint-venture securities firm in China.
Analysts said that the acceleration in approving the launch of joint-venture securities firms is part of the regulator’s preparation for the long-awaited international board in Shanghai. The board will allow overseas companies to raise capital in the A-share market.
“The board failed to debut in 2011 due to global turbulence,” Banny Lam, economist with CCB International Securities Ltd, said. “I believe the board will be launched in the second half of this year when the global economy should improve.”
We doubt the monetary authorities will crank up money supply growth by 40 percent as they did in 2009, but the depth the equity sell-off, coupled with the policy news could give a decent boost to the equity market.
Sustainable? We have know idea, have our doubts, but will let the market decide.
The S&P500 is also flirting with the 1292.66 October 27th high, but seems a little hesitant to cut loose. If China worries and a euro meltdown are taken off the table in the short-term, the market will only need decent and not great earnings as to move higher, in our humble opinion.
The European bond auctions, crude at $100 plus, and Iran need to be monitored closely, however.
P.S. Long Jon Huntsman in the New Hamster primary. More of a prediction than a political statement though we think he is one smart dude.
