China's main stock index surged over 6 percent on Wednesday, posting its biggest gain since November, after the government said it would expand its fiscal spending plan and data supported hopes for an early economic recovery.
The Shanghai Composite Index .SSEC rocketed 6.12 percent in heavy trade to close at 2,198.107 points, just off the day's high of 2,201.727. Sectors rose sharply across the board.
Gaining Shanghai A shares overwhelmed losers by 917 to one, with over 50 shares rising their 10 percent daily limits. Turnover in Shanghai A shares climbed to a one-week high of 127.5 billion yuan ($18.6 billion) from Tuesday's 79.8 billion. Continued...
My longtime colleague Uwe Parpart, now chief Asia strategist at Cantor Fitzgerald in Hong Kong, has argued all year that the Chinese economy will avoid recession thanks to aggressive intervention by the Chinese government. Today’s 6.2% surge in the Shanghai Composite in response to the likely increase in the existing stimulus package bears out the China bulls. This optimism has spilled over into commodity prices and raw materials stocks worldwide.
What’s the difference between infrastructure spending in China (stocks up 20% year to date) and infrastructure spending in the US (stocks down 20% year to date)? China needs infrastructure; the interior of the country remains horrifically backward and spending on infrastructure feeds rapidly into productivity, just as the huge infrastructure spend in the coast had a massive effect on productivity. The US could use some repairs, but putting a few hundred billion dollars into the hands of construction unions won’t change life in the United States....MORE