Stocks and yuan encourage the tiger

Reuters and staff reporter

The mainland stock market and the Chinese yuan rose on the first trading day of the Year of the Tiger.

The mainland market rose on its return from a week-long holiday, with sentiment boosted by Friday’s jump in Hong Kong-listed names and easing concerns over regulatory headwinds for the country’s struggling tech sector.

The Shanghai Composite Index rose 2.03% to close at 3,429.58 while the Shenzhen Composite Index gained 1.04%.

Oil stocks also soared yesterday, with shares of PetroChina Shanghai jumping more than 9%. Banking and telecommunications stocks also surged.

It came as Guan Tao, chief global economist at BOC International and former head of the State Administration of Foreign Exchange, said the Chinese government could take additional measures if necessary to keep the yuan stable, which could put downward pressure on the currency.

The onshore yuan closed at 6.3578 to the US dollar yesterday, up 58 points from the previous trading session.

Policymakers could increase the yuan’s flexibility, increase capital outflows or control capital inflows to rein in the yuan, which could deviate from near-term economic fundamentals, Guan wrote in an article published Monday in the Shanghai Securities. News.

The yuan is also facing downward pressure from several market factors, including the strengthening dollar index, the narrowing gap between US and Chinese yields and the narrowing growth gap between two economies, he added.

Guan, who previously headed SAFE’s balance of payments department, said the yuan was already losing momentum, citing falling trading volumes in the interbank foreign exchange market.

The Chinese yuan hit a nearly four-year high against the dollar on January 26, and an index that tracks the value of the yuan against a basket of currencies shows it flirting with the highest level since late 2015. .

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