Chinese shares jumped to a seven year high on Monday on speculation that the MCSI would add Chinese equities to their global index, bucking a decline in Asian equities.
MSCI will announce in the course of the week whether or not to include China “A” shares in its Emerging Markets Index, a decision market analysts expect to draw more than $400 billion to the Chinese equities over time.
The Shanghai Composite jumped more than 2.2% on the day to add onto the 9% gains reported last week on reforms in the country’s financial landscape and further monetary easing by the Central Bank.
The Chinese benchmark ended at 5181 points after crossing the 5000 mark last week Friday for the first time in seven years.
Trading volume in shanghai was however lower than usual with investors holding out for inflation data due Tuesday to give an indication on the Central Bank’s next likely step concerning the monetary stimulus.
“Further relaxation in monetary policy is anticipated, as we expect lower [a] CPI figure for tomorrow,” Xiao Shijun, analyst at Guodu Securities, told the Wall Street Journal.
Stocks in the greater Asian region, however, continued their decline on jitters over the timing of the US Federal Reserve’s interest hike.
The benchmark MCSI Asia Pacific Index fell 0.4% on Monday to 147.71 points extending its 2.3% decline last week after a better than expected US jobs report bolstered expectation for a September rate hike.
“The market will continue to consolidate,” Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd, told Bloomberg.
“There are a number of uncertainties out there, especially since equities have performed very well this year. If bond rates continue to increase, that will rock equity markets. Investors have to be prepared for a U.S. rate hike this year given that the U.S. economy has been doing pretty well.”
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