Market review: January 26, 2016

Fang • submitted 2016-01-26 15:31:05

Market review:

China stock market hit the YTD new low with heavier than expected selling before CB policy meetings and closed at 2749.79.

Research Notes:

As FOMC approaching, investors are generally not expecting any significant policy shift for the Jan meeting. As usual, the major concern is still capital escaping from China, despite the recent recovery of CNY and HKD values.
The People’s Bank of China added 440 billion yuan ($67 billion) using reverse-repurchase agreements, the most in three years, bringing net injections via its various lending tools this month to about 1.6 trillion yuan.
Money outflew from Tech, Real Estate and Biomedicine sectors the most, while Defense and Aviation sectors showed some relative strength during the slump. Tire manufacturer Double Coin Holdings rallied to limit-up for profit improvement from sinking rubber price.

Though the delusion of major Fed move mostly would be unrealistic for Jan minute, we could see some policy feedbacks, from both China and US, especially after the stock market fell today. As the sentiment deteriorated beyond our expectation and it may take more time for it to ever recover, in our opinion, it’s safer to stay put until the close of FOMC and after the evaluation of consequent moves of China gov and other major CBs.

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author: Fang

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