By Margaret Yang, CMC Markets
China Dec PPI hit five-year high, signalling further stabilization
China’s producer prices rose 5.5 percent y-o-y, or 1.6 percent m-o-m, which was the fastest pace in five years. The reason behind this is rising raw material prices, especially commodity prices. Producer Price Index (PPI) measures the average change in prices received by domestic producers for their output. Therefore, higher PPI indicates an increase in profitability and thus further stabilization in the world’s second largest economy.
The Hang Seng and Straits Times Index were leading Asia’s gains yesterday, backed by favourable Chinese inflation data. The Hang Seng Index closed 0.83% higher, with the retail sector advancing over 2%. Global e-commerce giant Alibaba’s proposed plan to privatize HK listed Intime Retail Group (1833 HK) in a move to digitize brick-and-mortar department stores. Intime Retail’s share price soared over 30% after this announcement.
On the same day, Alibaba’s chairman Jack Ma met with President-elect Donald Trump in a discussion to bring a million small US businesses into its platform over the next five years.
The Straits Times Index stands above 3,000 points for the first time in a year
Singapore’s stock market is embracing a remarkable “Chinese New Year Rally”. The Straits Times Index climbed over 100 points or over 4 % to 3,006 points within the first six trading days in 2017. This marks its highest level in more than 14 months.
The sustainability of this rally will depend on upcoming corporate earnings results, which will paint a clearer picture of future stock market performance. If earnings are good, we will probably see the Straits Times Index challenging the next resistance of 3,100 points soon.
The rally was led by three local banks, namely OCBC, DBS and UOB. Investors believe that a rising interest rate environment is favouring banks’ net interest margins. Concerns on their exposure on Singapore’s troubled oil & gas companies were also alleviated as crude oil prices climbing to above $50 per barrel.
Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.