There are quite a few snippets of interesting information out in the wake of the People’s Bank of China easing policy which seems to be the trade du jour at the moment. The Chinese trading volumes are very high and look set to hit around RMB280 billion turnover today on the Shanghai Stock Exchange.
aastocks.com is giving out some data on the foreign inflows, which saw foreigners buying RMB810 million yesterday, and RMB614 billion of those going to blue-chip purchases. The question is how much of an influence the Shanghai – Hong Kong Stock Connect is having here, given that it probably adds to liquidity. Having a focus on blue-chips could also explain yesterday’s outperformance of the Shanghai A50 index of blue-chip stocks relative the general SSE market.
The main winners off of the easing policy, equity-wise, were property developers and life insurers. The jump for insurers is rather quizzical, since they normally gain from added interest rates. If the expectation is that there will be higher yields generally thanks to this policy, and that the path is getting paved to better spread of debt capital towards non-SOE borrowers, then this might help. There is also the possibility that there are some China-internal structures that I am as of yet unaware of that changed, meaning that insurers can become much more profitable. Expectations of households moving savings towards insurance products is definitely a possibility, but I don’t think it would shake up the market to this extent.
Property developers are a little bit easier. Given worse yields elsewhere, the available savings products get preference, and since housing is more or less a savings project in China, ta-da! Property is also one of the markets that has been regulated the hardest and prospects of easing here to reignite the economy will take some of the regulation-related discount out of property stocks in China, just by virtue of not being on as terrible a trajectory as people might have been expecting.