Chinese stocks surged yesterday after the authorities relaxed rules on borrowing to buy shares, but other Asian markets struggled as oil ticked lower on renewed fears of oversupply.
Shanghai climbed above 3,000 for the first time in over two months, meaning the bourse has rebounded 13% from a January low.
Shanghai – Composite up 2.15% at 3,018.80 points and Hong Kong - Hang Seng up 0.06% at 20,684.15 points at the close yesterday. Tokyo market was closed for a holiday.
After the turmoil that swept global trading floors in the first two months of the year, some stability has returned. March has seen a broad uptick, with last week’s Federal Reserve comments on lowering its rate hike forecast providing strong buying incentives.
However, analysts said markets were having trouble maintaining their rally as dealers eye the long Easter break that starts on Friday.
“We’re not seeing a lot of enthusiasm in markets given the holiday-shortened week and the strong rally that we’ve had recently,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, told Bloomberg News.
“We need to see more catalysts for this rally to continue. We need to see some signs growth is stable.”
Shanghai jumped 2.15% after authorities loosened rules on margin trading for the first time since last summer’s collapse in mainland markets.
Margin trading, through which investors only need to deposit a small proportion of the value of their trades, was behind a boom that sent the Shanghai bourse up 150% in 12 months, before it plummeted from last June after regulators moved to tighten rules on the practice. “The loosening could reignite interest in the equity market, particularly as the regulators’ actions last year—to rein back private-sector broker leverage—helped trigger the correction in equity prices,” said Koon Chow, senior macro and currency strategist at Union Bancaire Privee in London.
Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co, added: “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.”
Hong Kong was broadly flat at the close and Singapore shed more than 1% in late trade. Seoul closed 0.12% off while Tokyo was shut for a public holiday. Sydney eased 0.32% on the day that Elmer Funke Kupper, the head of Australia’s stock market operator, resigned amid a police inquiry into bribery allegations at a gaming group he previously managed.
Oil prices turned lower, with US benchmark West Texas Intermediate almost 2% off and Brent down more than1%.
The losses follow a week of gains that lifted WTI above $40 for the first time since December, on hopes of an output freeze when key producers meet next month.
The fresh drop was spurred by an increase in operational US rigs.
“There is a bit of a correction after the spike above $40 because the market is still oversupplied and demand is sluggish, although it’s better than what it was,” said Evan Lucas, a market strategist at IG in Melbourne. “An average of around $35 a barrel is likely in the second quarter. There are signs that the supply side is feeling the pinch and have been forced to act.”
The dollar continued to struggle against the yen after plunging last week in response to the Fed—citing weakness in the global economy—saying it would lower its outlook for raising borrowing costs this year.
But the greenback rose against most emerging-market currencies. The South Korean won was down 0.09% and Indonesia’s rupiah 0.32% lower, while the Australian dollar was up 0.02%.
Europe’s main stock markets dipped at the start of trading, with London down 0.5%, Frankfurt losing almost 0.6% and Paris shedding 0.8%.