China shares outperform in Asia as policy continuity stakes

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(Bloomberg) — Chinese shares rose Monday, outperforming broader Asian markets as traders digested the surprise news that China’s economic leadership team would retain many familiar faces.

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Analysts said the moves to keep central bank governor Yi Gang, finance minister Liu Kun and commerce minister Wang Wentao in place were practical which could boost investor confidence at a time of uncertainty, given the suggestion of policy stability.

Stocks advanced in Hong Kong and on the mainland, with the Hang Seng China Enterprises index, a gauge of Hong Kong-listed Chinese equities, jumping as much as 2.6% in the morning session. A broad measure of Asian shares was up 0.3%.

The jump in Chinese shares was a reversal from last week, when they sold off as the National People’s Congress announced a lack of major policy stimulus.

Read: Chinese stock bulls take a blow as Congress mounts pressure

It is still unclear who will replace Liu He as President Xi Jinping’s economic official, although He Lifeng, who was named vice premier on Sunday, has been widely tipped for the position .

Here’s what the experts are saying about leadership:

Hao Hong, partner at Groww Investment Group

“The prefers continuity and Yi Gang is seen as a reformist technocrat and the market gives him credibility to handle monetary policy during the pandemic,” he added. “Thus, he adapts to the market.”

He added, however, that the governor’s role “could also be a transitional role considering his age. So he may or may not complete the full term.”

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Zhang Zhiwei, Chief Economist, Pinpoint Asset Management Ltd.

“It’s a surprise to the market,” Zhang said of Yi’s reappointment. The 65-year-old ministers were expected to step down after reaching retirement and being dropped from a list of officials of the ruling party last year.

“I think it is a practical option because new leaders need professional experts to deal with complex economic and financial challenges,” Zhang said. “Leaders understand that the priority is to build confidence. This decision is a step in that direction.”

Ming Ming, chief economist at Citic Securities Co.

“The lineup shows that policy stability will be emphasized as it is necessary for economic recovery and support for some industries,” Ming said. “It doesn’t matter who becomes governor of the PBOC, the policy direction won’t change much.”

Hui Feng, Senior Lecturer at Griffith University

Hui suggested that Yi’s reappointment could be an “interim arrangement”.

A rumored candidate for the governor’s job, central bank veteran Yin Yong, was recently named Beijing’s premier, and Hui said Xi wanted to find a replacement so Yin could move to the PBOC.

“It also shows that the leadership is not convinced of other rumored candidates when stability is a priority,” said Hui, co-author of “The Rise of the People’s Bank of China.” He noted the “serious challenges” the bank faces in the short term, “namely the ballooning public debt and the great uncertainties in the global economic and geopolitical arena.”

Christopher Beddor, Deputy China Research Director, Gavecal Dragonomics

“It’s a perfectly reasonable choice,” Beddore said of Yee. “The leadership was clearly debating among several candidates for this decision, and opted to go for continuity.”

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“Given the major government and party restructuring the PBOC will face in the coming months, this should provide some reassurance to the markets,” Beddore said, calling Yee “more of a head-down than an influential policy entrepreneur.” More of a monetary-policy technocrat”.

Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc.

“The reappointments signal a continuation in fiscal and monetary policies, as the leadership remains fully focused on improving the economy,” Pang said.

He said officials have “increased significantly” in prioritizing economic development since the Communist Party Congress was held last year.

Qian Wang, Asia-Pacific for Vanguard Group Inc. chief economist of

Senior leaders of the State Council, China’s cabinet, are close allies of Xi who share “a lot of trust”, Wang said, suggesting that policy implementation would now be better coordinated.

He added that the presence of “strong technocrats” such as Yi and Liu should make up for some of the new leaders’ lack of national experience.

One problem for China over the years was that the policy decision-making structure was “highly centralized while the policy implementation structure was highly decentralized,” she said. “This created a lot of uncertainty and ambiguity on the ground when policies were implemented and confused markets and businesses.”

Fiona Lim, Malayan Banking Bhd. in Singapore. Senior Forex Strategist at

“Yi Gang’s reappointment is likely to be welcomed by the market” as well as “favorably for the yuan,” Lim said, adding that attention will turn to activity data for January and February, which will be released on Wednesday. is about to happen.

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“Further evidence of recovery could bring more gains for the yuan,” he added.

Christopher Wong, forex strategist at Overseas-Chinese Banking Corp in Singapore

Yee’s reappointment, Wong said, means “a desire for a steady pair of hands to continue with the existing policy”. -Term liquidity and support to the economy, as directed by the authorities.

He expects the central bank’s monetary policy stance to remain “prudential”.

Khun Goh, Head of Asia Research at Australia and New Zealand Banking Group

“Asia will benefit from China’s reopening, even if goods exports remain weak in the near term,” he said. “Any troubles in the US financial system are not seen to have much impact on this part of the region. Therefore, we can expect Asian currencies to remain resilient.”

Galvin Chia, Emerging Markets Strategist, NatWest Group plc

“Monetary policy is looking neutral this year,” Chia said, adding that the consumer sector “is still doing well enough so they will wait and see.”

“I think the trade reopening looks more like a local sectoral rotation,” Chia said, adding that “the macro still looks like US-driven.”

– With assistance from Tania Chen, Wenjin Love, Chester Yung, Shikhar Balwani and Charlotte Yang.

(Updated with additional comments, as stocks move.)

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