Chinese stocks rose for the second day in a row mainly led by technology and industrial companies. This comes in the eve of Chinese President’s Xi Jinping’s visit to the United States for his first state visit.
Notably, the Shanghai composite index had gained 1.9% to reach 3156.54 at the close the last day of trading. This change reversed a drop of 1.2% as volatility hovered just near the 18-year highs that had been attained last week with trading volumes slumming 36% from the previous standing 30-day average. China Railway Group and XCMG Construction Machinery company made more than 7% in Shanghai. During president Xi’s visit of the United States from the 22nd to the 25th of September, the United States and China are expected to reach agreements with regards to climate, finance, energy, trade, aviation, defense and also infrastructure construction. This is according to Wang Yi, the Foreign Minister of China.
Technology and industrial companies had rallied on speculations that they might attain increased orders as a result of the United States by president Xi. The visit will apparently end with a summit with President Barack Obama on Friday. Deals that have since been announced before the president makes his visit include the first Chinese-made bullet train project initiated in the United States.
Support to stocks
The official visit of the president of China and other authorities to the United States will most definitely offer support to some stocks. Many Chinese companies have over the years been looking into the prospects of expanding overseas and such kinds of official visits might just be helpful in enabling these companies make the switch and grow their worldwide presence. Technology related stocks are expected to benefit a lot from the visit of the Chinese president to the United States. This is however market expectation considering that such things normally happen when meetings between heads of some of the most powerful nations in the world meet to discuss business.
In recent days, the Hang Seng China Enterprises Index dropped from a one-month high by losing a considerable 1.6% in Hong Kong at 3.14 pm whereas on the other hand, the Hang Seng Index slid 1%. The CSI 300 index rose by a considerable 1.8%. In that same regard, the ChiNext index grew by 4.8%.
Before these occurrences, the Shanghai Composite had gone down 39% from this year’s peak in June in the midst of increasing concerns from various quarters with regards to the outlook of the second biggest economy in the whole world. Notably, up to five interest rate cuts since the month of November and more so plans to boost state spending have yet to build or revive trade growth amid the issue of overcapacity and the common producer-price deflation. A preliminary manufacturing report from China will most definitely show a contraction in the manner in which business has been going on.
The economy of China as a country is not as weak as it might actually look. This simply means that no idea of collapse is in the offing. In the aftermath of the plunge in stock prices and subsequent currency devaluation, there is still room for improvement in the coming days. It is also good to note that capital expenditure has been rebounding quite considerably and the services sector on the other hand has been showing notable strength.
The gauges for both industrial and technology companies rose by over 3% for the steepest gains ever made among 10 groups. Some companies have even seen daily surges in stock prices of more than 10%. This shows that the president Xi’s visit to the United States will only serve to make things better for trade in China. There is a lot of growth prospects that are expected to be gained in the event of this state visit.