TOKYO ( BLOOMBERG, REUTERS) - Chinese stocks jumped the most in two months on Tuesday (Jan 19) as industrial companies surged amid speculation of state-fund buying and traders weighed weaker-than-estimated economic data against prospects for increased stimulus.
The Shanghai Composite Index rallied 3.1 per cent to 3,005.1 at 1:40 pm, heading for its biggest gain since Nov 4. China Communications Construction Co and China Railway Group both surged by the daily limit. Data on Tuesday showed China's economic growth missed analysts' estimates last quarter, while industrial production, retail sales and fixed-asset investment all slowed at the end of the year.
The Hang Seng China Enterprises Index rose 2.5 per cent in Hong Kong, while the Hang Seng Index advanced 1.4 per cent. Trading volumes in Shanghai were 9 per cent below the 30-day average for this time of day.
Asian shares were mostly higher and Spreadbetters expected Europe to follow Asia's lead and forecast a higher open for Britain's FTSE, Germany's DAX and France's CAC.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.8 per cent, rebounding from a four-year low touched earlier, while Japan's Nikkei were nearly flat. South Korea's Kospi was up 0.3 per cent and Malaysian stocks rose 0.2 per cent.
Singapore's Straits Times Index was up 0.47 per cent at 2,605.06 as of 2:10 pm.
Reorient Financial Markets Ltd says government-led funds may have entered to bolster the market, which was a typical occurrence on large down days during last year's US$5 trillion rout and has been more sporadic amid the recent bear-market slump.
"The national team may be stepping in to boost confidence," said Steve Wang, research director and economist at Reorient Financial in Hong Kong. "The latest GDP data barely moved the market as it's only slightly lower than consensus estimates."
China's stocks have been volatile this week with trading volumes slumping after the benchmark index entered a bear market on Friday amid concerns about the government's ability to manage its economy and financial markets.
Tuesday's data showed the economy is growing at two speeds, with old rust-belt industries from steel to coal and cement in decline while consumption, services and technology do better.
A gauge of industrial companies in the CSI 300 rose 4.7 per cent, the most among the 10 industry groups. China Communications Construction jumped 10 per cent, while China Railway Group also gained 10 percent.
China officially launched the US$100-billion Asian Infrastructure Investment Bank on Saturday with an opening ceremony attended by President Xi Jinping. The bank will boost infrastructure investment in Asia and improve integration, he said.
Gross domestic product rose 6.8 per cent in the fourth quarter, less than the forecast for 6.9 per cent growth. For the full year, GDP increased 6.9 per cent - the least since 1990 - in line with the government's target of about 7 per cent. Industrial production rose 5.9 per cent in December, compared with the 6 per cent estimate of analysts. Retail sales increased 11.1 per cent, compared with the 11.3 per cent forecast. Fixed- asset investment excluding rural areas expanded 10 percent last year, the weakest pace since 2000.
"The data pretty much came in as expected," said Jackson Wong, associate director at Huarong International Securities Ltd in Hong Kong. "I would love to see how they are going to stimulate the economy now. As of now we've seen most of the things that they could have done - infrastructure, RRR and interest-rate cuts and even depreciating the yuan. But we haven't seen anything to make the economy significantly pick up."
The policy response to last year's slowdown included accelerated monetary easing with six interest-rate cuts since late 2014 and increased fiscal spending.
The Australian dollar, often used as a proxy for China-related trades, was up a modest 0.3 per cent at $0.6886 . The Aussie was still firmly within reach of a seven-year low of US$0.6827 touched last week amid a rout in commodity-linked currencies.
The Hong Kong dollar touched a new four-year low of 7.8045 versus the US dollar, taking it to the lower end of its trading band.
Under a three-decade old currency peg regime, the value of the Hong Kong dollar is allowed to fluctuate within a band of 7.75 to 7.85. Capital outflows in the wake of recent volatility in the Chinese stock and currency markets have buffeted the Hong Kong dollar.
As risk appetite thawed slightly, the US dollar nudged up 0.3 per cent to 117.64 yen after slipping last week to a 4-1/2-month low of 116.51 versus the safe-haven Japanese currency.
The euro dipped 0.1 per cent to US$1.0886.
In commodities, Brent crude was up 1.5 per cent at US$29.00 a barrel, rebounding from recent sharp losses.
Still, Brent remained in proximity of a 13-year low of US $27.67 hit on Monday on worries about the return of additional Iranian crude to an already oversupplied market.
International sanctions on Iran were lifted at the weekend, removing an obstacle to one of the world's biggest oil producing nations. Tehran on Monday immediately issued an order to ramp up production.
US financial markets were closed on Monday for Martin Luther King Day.