China Market climbs to 4-month highs

Mainland China share market finished session at four-month high on Monday, 16 January 2023, as China's central bank stepped up liquidity injections on Monday and expectations that Chinese authorities will do more to stimulate the country's COVID-ravaged economy.

At close of trade, the benchmark Shanghai Composite Index advanced 1.01%, or 32.29 points, to 3,227.59, a highest level since 14 September 2022. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 1.35%, or 27.83 points, to 2,094.99. The blue-chip CSI300 index was up 1.56%, or 63.58 points, to 4,137.96.

China's central bank left its medium-term lending facility rate unchanged and added more funds to maintain sufficient liquidity in the financial system. The People's Bank of China on Monday added 779 billion yuan via one-year medium-term lending facility. The rate on MLF was kept unchanged at 2.75%. With 700 billion yuan worth of MLF loans set to expire this month, the operation resulted a net 79 billion yuan fresh fund offering. The move aimed to keep liquidity in the banking system "reasonably ample" and fully met financial institutions' cash demand.

China's central bank has pledged to take further measures to boost market confidence and increase support for manufacturers and small companies, Xuan Changneng, a PBOC deputy governor said on Friday, as hopes grow that the economy will stage a solid rebound this year.

Chinese infrastructure stocks rose sharply as local governments announced new spending plans for big projects and set bullish growth target for this year.

CURRENCY NEWS: China's yuan was up against the dollar on Monday, inline with firmer mid-point fixing by China's central bank and continued capital inflows thanks to post-pandemic economic recovery hopes. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 6.7135 per dollar, 158 pips or 0.24% firmer than the previous fix of 6.7292, the strongest since July 11. In the spot market, the onshore yuan CNY=CFXS opened at 6.6950 per dollar and rose to a high of 6.6898 at one point, the strongest level since July 5. By midday, it was changing hands at 6.6977, 23 pips firmer than the previous late session close.

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