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China's Blue-Chip Index Lower on Policy Tightening Worries

China’s blue-chip index recouped earlier losses to end higher on Friday, helped by gains in infrastructure and securities stocks, though it posted weekly losses on investor concerns over policy tightening and lofty valuations.

** The blue-chip CSI300 index edged up 0.2% to 5,778.84, while the Shanghai Composite Index added 0.6%to 3,696.17.

** For the holiday-shortened week, CSI eased 0.5%, while SSEC firmed 1.1%.

** Leading the gains for the day, the CSI300 infrastructure index jumped 2.9%, while the CSI SWS securities index climbed 2.7%.

** Among sectors with high valuations, the CSI300 consumer staples index retreated 2.6%, snapping a four-week gain, while the CSI300 healthcare index slumped 4.3%.

** “Basically PBOC would start to drain liquidity sooner than the U.S. Fed, while there are already expectations of a rise in domestic interest rate,” said Jin Jing, an analyst with Caitong Securities.

** Investors could start to rebalance their allocations, shifting out of expensive stocks towards cyclical players with low valuations that would benefit from an economic recovery, Jin added.

** With 100 billion yuan ($15.45 billion) worth of reverse repos maturing on Friday, China’s central bank drained a net 80 billion yuan on the day.

** The People’s Bank of China (PBOC) has achieved its goal of maintaining the stability of money market interest rates around the Lunar New Year holiday with measured, targeted open market operations, the central bank publication Financial News said in a commentary published on Thursday.

** The PBOC rolled over maturing medium-term loans earlier on Thursday, but drained 260 billion yuan worth of short-term liquidity on a net basis as a result of maturing reverse repos on the day.

** China’s benchmark lending rate is set to stay unchanged for the 10th straight month at its February fixing on Saturday, a Reuters survey showed.

(Reporting by Shanghai Newsroom, Editing by Sherry Jacob-Phillips)

Source: Reuters

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