adminHONG KONG – For investors reacting to China’s annual policy road-map, it’s what authorities didn’t say that mattered most. Chinese small-cap stocks rallied after Premier Li Keqiang failed to mention a planned shift to a more market-based system for initial public offerings (IPOs), a reform seen luring funds from existing equities.
The yuan snapped a four-day gain after policy makers refrained from announcing any support measures. While Li’s pledge to make development a top priority boosted transport and infrastructure shares, the nation’s sovereign bonds fell on concern the government will boost borrowing to back the economy.
Li outlined an economic growth target of 6.5 percent to 7percent for 2016, with 6.5percent pegged as the baseline through 2020. To reach the target, the government said it raised its money supply expansion target and will permit a record high deficit.
China’s plan to streamline rules for IPOs is unlikely to be implemented this year, according to a person familiar with the situation.
Data due Monday are forecast to show foreign- exchange reserves declined in February as the nation backed the yuan.
Investors consider the delay to new IPO rules as “good news,” said Jackson Wong, associate director at Huarong International Securities in Hong Kong. “They announced the GDP target, which was rather a bit worrying because they said 6.5percent to 7percent, which means it might drop to 6.5%.” -Fin24.
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