Chinese stocks rallied for a fifth straight day yesterday as the country’s leadership produced confirmation of another round of big infrastructure deals.
The Shanghai market was up 3.8%, and a new seven year high, after last week’s 8.1% surge. Hong Kong and South Korea, like the UK, Germany and the US, were all closed for public holidays overnight.
The Japanese market also rose 0.7% to a new 15 year high, and the Australian market was up a solid 1%, or 57 points.
China’s Ministry of Finance said Monday it would cut import duties on cosmetics, shoes and clothes by 50% on average, as part of a plan to boost domestic consumption and sustain economic growth.
And State Council said it would be checking on the implementation of its policies in the next six weeks with an eye to making sure moves to stimulate spending and the economy were being carried out.
More than $US70 billion of spending deals were greenlighted last week by the country’s State Council, its cabinet, and yesterday it emerged that an even bigger round of approvals were approved by the Council late last week.
The State Council issued guidelines on Friday aimed at promoting public-private partnership (PPP) in public services and the National Development & Reform Commission said it was seeking private funding for over $US300 billion worth of public projects.
The Commission unveiled the list of 1,043 so-called public-private partnership (PPP) projects on its website, in yet another move by the government to try and revitalise China’s flagging economy.
Along with the move to force banks to continue lending to all local government projects started before the end of 2014 (over $US3 trillion worth) and several other decisions from the State Council, it’s clear the Chinese government is very, very worried about the slowing pace of activity in the economy.
The guidelines issued by State Council make it clear the government wants the PPP idea to take root quickly and to start making an impact as soon as possible. The State Council statement said:
"There should be innovation and reform in the mechanism to build a new system promoting the development of PPP mode, said the guideline. A regulated, transparent and orderly PPP market with strong supervision should be established to reduce the debt risks of local governments, according to the guideline. Implementation and administration frameworks should be clarified, fiscal management system improved, public service quality and price supervision enhanced, and the price adjustment mechanism improved, said the guideline. The guideline also encourages wide application of PPP mode. New projects should go through financial viability criteria. Cooperative partners can be chosen on the government shopping information platform.”
Another big factor yesterday behind the surge in Chinese and Hong Kong shares was the looming launch of a China-Hong Kong mutual fund recognition program, and expectations for the coming Shenzhen-Hong Kong stock connect (adding to the existing connect between Shanghai and Hong Kong).
The ASX 200 closed 57 points higher, or by 1%, at 5721.5, while the All Ords added 52 points to 5719.9, thanks to a rise in bank stocks and higher iron ore prices.
Iron ore prices jumped back over $US60 a tonne overnight.
According to the Metal Bulletin’s iron ore index, the price jumped 2.03%, or $US1.22, to $US61.18 a tonne on Monday.
That means they are up 7% in the past three trading days.
Markets in the US, UK and Germany were closed – share prices in Italy and Spain fell more than 2%.
