China markets spiked 4.8% yesterday, with Hong Kong riding on its coattails to rally 2.7% as H-shares saw the steepest one-day gain since 2011.

The rally in China and Hong Kong came on the back of China’s announcement to liberalise policies aimed at bolstering an economy that’s heading for its weakest annual expansion since 1999.
 
Sweeping reforms released by China
A Communist Party document, covering 60 measures, was released last Friday after a four-day party conclave to discuss reforms for China over the next ten years. Amongst the measures, the Chinese government pledged to allow more private investment in state-controlled industries, loosen its one-child policy and expand farmers’ land rights.
 
China will also aim to develop a “mixed ownership economy” that helps state-owned assets maintain or increase their value and boost their competitiveness. Convertibility of the yuan will be accelerated, interest-rates freed up, treasury yield curves improved and qualified private investors will be allowed to set up small-to-medium sized banks.
 
Most news sources reported that these announced reforms beat market expectations.
 
While Chinese and Hong Kong investors were clearly in an euphoric mood after the announced reforms, local investors in the STI were more subdued in their response, inching up just 0.1% yesterday.
 
Trading Chinese volatility via China A50 warrants
Investors who are keen to trade the volatile Chinese markets can do so via Macquarie’s China A50 warrants.
 
The China A50 warrants track the movement of the SGX China A50 futures. The FTSE A50 Index in turn tracks the performance of the 50 largest A-share companies listed on the Shanghai and Shenzhen stock exchange. It includes mega-names like Ping An Insurance, China Merchants Bank and Shanghai Pudong Development Bank. The index gives investors a broad exposure to the China story.
 
Key Macro Data this week
With the Chinese reforms announced, investors will also be looking at upcoming economic releases for an indication of market direction. Most of these data will be released mid-week on Wednesday and Thursday.
 
Wed 20 Nov: China Conference Board Leading Economic Index (Oct), US CPI (Oct), Advance Retail Sales (Oct),  Existing Home Sales (Oct)
Thu 21 Nov: Bank of Japan Target Rate, China HSBC Flash Manufacturing PMI (Nov), S’pore GDP (3Q), Eurozone PMI (Nov), US Business Outlook (Nov)

Source: Macquarie Research - 19 Nov 2013