Asian Stocks Gain as Shanghai Composite Jumps to Two-Month High

  • Chinese brokerages surge as controls on margin lending eased
  • Philippine stocks rise to August high, extends bull market

Asian stocks rallied in late trading, with a regional gauge erasing declines, as Chinese shares climbed above the 3,000 level for the first time since January after policy makers loosened controls on margin lending.

The MSCI Asia Pacific excluding Japan Index added 0.1 percent, erasing losses of as much as 0.5 percent earlier. Japanese markets are closed for a holiday. More than $4 trillion has been added to the value of global equities this month as stimulus efforts from central banks couple with an oil-driven rally in commodities to burnish investor sentiment. China’s Shanghai Composite Index rallied to a two-month high after policy makers are loosening controls in the stock market.

“The state doesn’t want the market to decline and they want to see buying from investors so we’ve seen them loosen their grip on margin lending,” said Wang Zheng, who has been adding his holdings recently as the Shanghai-based chief investment officer at Jingxi Investment Management Co. “There’s no big negative news now as the top priority for the regulator is to stabilize the market. There will be no radical reforms.”

Shanghai Rally

The Shanghai Composite Index rose 2.2 percent, while the Hong Kong’s Hang Seng China Enterprises Index of mainland stocks traded in the city gained 0.5 percent. China Securities Finance Corp. said Friday it will boost lending to brokerages for their margin trading business after the nation’s stock market slumped and leverage more than halved from last year’s peak.

People’s Bank of China Governor Zhou Xiaochuan and Vice Premier Zhang Gaoli indicated at the annual China Development Forum in Beijing at the weekend that they think overall lending in Asia’s largest economy is too high, just days after the national legislature said its top priority was securing annual growth of at least 6.5 percent. 

Chinese brokerages Citic Securities Co. and Haitong Securities Co. jumped at least 5.4 percent in Hong Kong after China Securities Finance said it will reduce rates on margin financing to boost lending in the stock market. CJ E&M Corp. dropped 4.4 percent in Seoul on speculation first-quarter earnings will be weak as the film producer didn’t have any blockbuster movie compared with its competitors. Berjaya Sports Toto Bhd. slipped 4.1 percent in Kuala Lumpur after the Malaysian lottery operator reported a 44 percent slump in quarterly profit.

Catalysts Needed

Hong Kong’s Hang Seng index finished 0.1 percent higher, erasing earlier losses of as much as 0.3 percent. The Philippine Stock Exchange Index climbed 1 percent to the highest close since Aug. 14, after capping a 20 percent gain from its Jan. 21 low to enter a bull market last week. New Zealand’s S&P/NZX 50 Index added 0.3 percent. South Korea’s Kospi index lost 0.1 percent, while Singapore’s Straits Times Index dropped 0.9 percent. Taiwan’s Taiex index closed little changed. Australia’s S&P/ASX 200 Index fell 0.3 percent.

“We’re not seeing a lot of enthusiasm in markets given the holiday-shortened week and the strong rally that we’ve had recently,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.  “We need to see more catalysts for this rally to continue. We need to see some signs growth is stable.”

Futures on the S&P 500 slid 0.1 percent on Monday, after the underlying U.S. benchmark added 0.4 percent on Friday, bringing its fifth straight weekly gain to 1.4 percent. The Standard & Poor’s 500 Index returned to levels last seen at the end of 2015 on Friday, erasing its worst start to a year, while signs policy makers will continue to support economies with unprecedented easing helped propel developing-country stocks more than 20 percent higher from a January low.

West Texas Intermediate crude for April delivery fell as much as 2.1 percent on Monday, heading for a second day of decline after rising above $40 a barrel last week. A rebound in U.S. drilling adds to signs producers will keep pumping crude amid a global glut.

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