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15.03.202111:30 Forex Analysis & Reviews: Beijing is accelerating, but Chinese enterprise stocks are falling. Zheng Chengyu says "We're popping bubbles."

News is coming out from Beijing that China has overcome the impact of the Covid-19 pandemic, or at least is succeeding well as the superpower's economy recovers at an accelerated pace.

Exchange Rates 15.03.2021 analysis

Today, the government of the People's Republic of China published the main reports for February, including data on industrial production, investment in fixed assets, retail sales, as well as indicators of the unemployment rate.

Experts noted that while the reliability of the figures was affected by the low base after the 2020 recession, they are still impressive.

Thus, the production of all industries in the aggregate increased by 35.1% compared to the data of the previous year. In comparison with December, this figure is 27.8% higher. This is as much as 30% more than the predicted level according to analysts ' surveys conducted annually by Reuters.

Retail sales increased by 33.8%, which is higher than the forecast of 32% and 29.2% higher than the December level. Last year, the Republic of China closed January and February with a 20.5% reduction.

Exchange Rates 15.03.2021 analysis

Louis Kuijs, head of Asian Economics at Oxford Economics says: "We forecast positive growth in exports and investments in manufacturing enterprises this year... Private household consumption is expected to be a boost from the second quarter... as government travel restrictions ease."

China's ability to quickly recover from the coronavirus pandemic is impressive to analysts. In 2020, the Chinese economy was the only one that showed an annual growth of 2.3% of GDP.

Exports reached a record high in February, and producer prices show the highest figures since 2018.

Economists at Oxford Economics argue that such gains were made possible by strong, sustained foreign trade, pent-up demand, and government incentives to producers.

Usually, the data on the Chinese economy for January - February are distorted due to the celebration of the New Year on the lunar calendar, which falls in February.

At the same time, Chinese indices are falling. This is due to concerns of industrialists about the tightening of the regulatory policy of the authorities. Paradoxically, the excess of indicators in the PRC often causes reduction, so it is expected to tighten policy and limit subsidies in connection with the coronavirus.

Exchange Rates 15.03.2021 analysis

The blue-chip CSI300 fell 3% and then dropped another 2.2% to 5,035.54 points, while the Shanghai Composite fell 1% to 3,419.95 points.

The CSI300 index is in the correction corridor, down to 15% from a high of 5,922.02 points, which was recorded recently.

The most affected were the CSI300 Consumer Goods Index (-3.8%), the CSI300 Health Care Index (-4.2%) and the CSI New Energy Index (-3.9%).

Zhang Chengyu, a Beijing-based hedge fund manager, called the process "a preemptive collapse of bubbles through frothy valuations, including by limiting lending in the equity and real estate markets, and by giving individual hints on such stocks within the market."

On account of hopes for the recovery of the region's economy, shares of Asian companies except for Chinese, Filipino and Indian, are gaining. Asian currencies are also rising especially the Taiwanese baht and the Taiwanese dollar.

Shares of Philippine companies are declining amid reports of an increase in the number of cases of coronavirus. During Monday's session, they fell by more than 3%.

Shares of enterprises in South Korea and Japan are steadily growing. So, the Nikkei index rose by 0.3% or to 29,806.41 (2:19 to 29,806.41 GMT). Thus, the capitalization of the shipbuilding company Mitsui E&S Holdings added 7.22%, Kawasaki Kisen and Nippon Yusen by 3.96% and 4.31% respectively. Steelmaker JFE Holdings increased its capitalization by 3.39%, while industrial conglomerate Kawasaki Heavy Industries added 3.96%

The shares of e-commerce Rakuten rose to 18% after announcing a merger with postal conglomerate Japan Post Holdings, making it the largest capital in the Nikkei. Japan's postal organization added 1.71%.

Among the Topix top 30 leaders, Honda Motor showed the largest increase, which increased by 3.42%, followed by Mitsubishi UFJ Financial Group, which added 3.21%.

At the same time, the fall of the Nasdaq on Friday was reflected in the Asian market. Shares of most technology companies fell on Monday.

Nikkei SoftBank Group shares went up by 1.36%. Tokyo Electron shares were down by 0.78% and Advantest was down by 0.8%.

South Korea's KOSPI rose 0.11% to 3,054.39 by 02:35 GMT. This is the third session that the South Korean market brings to a plus. The Won is declining, but benchmark bond yields are rising.

Among the tech giants, there are both those who added to the capitalization and those who lost it. Among the first are Samsung Electronics (-0.60%) and SK Hynix (-0.36%). LG Chem (2.44%) and Naver (0.26%).

The Australian dollar and Australian futures show a drop in connection with the news from the United States.

Shoichi Arisawa, the General Manager of Investment Research at IwaiCosmo Securities, says that today's market in Japan and other Pacific Rim countries is a reflection of Friday's US session. Investors are betting on cyclical stocks benefiting from the U.S. economic recovery helped by the approval of a huge economic package.

Exchange Rates 15.03.2021 analysis

Now the TR Equity Hong Kong Index is showing a decline, but Japan's indices are in the positive territory thanks to a decline in 10-year bond yields ahead of the Bank of Japan's policy announcement.

At the same time, on Friday, the US market declined due to the inexorable rise in bond yields. It is quite possible to expect the same behavior in the Japanese market after the publication of reports and plans for monetary policy.

Egor Danilov,
Analytical expert of InstaSpot
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