Shanghai benchmark hits 10-year high as easing deflation lifts sentiment

[SHANGHAI] Mainland China and Hong Kong stocks advanced on Friday (Jan 9), with the Shanghai benchmark topping the psychologically important 4,100 points to a decade high, as investor sentiment improved on signs of easing deflationary pressures.

At the close, the benchmark Shanghai Composite index rose 0.92 per cent to 4,120.43 points, the highest since 2015. It jumped 3.82 per cent for the week to record the biggest weekly percentage rise since November 2024.

The blue-chip CSI300 index added 0.45 per cent, advancing 2.79 per cent for the week.

Hong Kong’s benchmark Hang Seng Index climbed 0.32 per cent, but eased 0.41 per cent for the week.

“We remain positive on Chinese equities, partly because we expect China’s efforts to balance domestic demand and supply to be supportive for the earnings outlook and to drive upward consensus earnings estimate revisions,” said William Bratton, head of cash equity research for APAC at BNP Paribas Exane.

“However, given the expected sequencing of realised impacts, we have a near-term preference for sub-industries in materials, industrials, and technology over their direct consumer-facing peers.”

CSI 300 Material sub-index rose 1.51 per cent, while the Hang Seng Material Index gained 2.29 per cent.

Signs of easing trade tensions between the world’s two largest economies, authorities’ pledge to boost domestic demand and support the broad economy should continue to boost A shares, Zeng Wanping, investment director at Panshi Fund, said.

The overall valuation of A shares are not very high, he noted.

A firmer yuan and ample liquidity conditions also underpinned the market, analysts at Morgan Stanley said. REUTERS