Equity and commodity prices surged across the world after China announced a $586-billion stimulus package that may spur economic growth in that country, the world’s third largest economy, and help avert a global recession.
Indian stocks rose the most in more than a week, led by metals and mining stocks, and the Bombay Stock Exchange (BSE) benchmark Sensitive Index (Sensex) advanced 571.87, or 5.7 per cent, to close at 10,536.16. This was in tune with the rest of the world markets.
Stocks also rose all over Europe and the US index futures went up sharply. Emerging-market stocks jumped the most this month with the MSCI Emerging Markets Index rising 3.5 per cent. China’s CSI 300 stock index surged the most in seven weeks, gaining 7.4 per cent.
China plans “fast and heavy-handed investment” in housing aand infrastructure to lift growth from a five-year low, the State Council said yesterday. China is India’s third-largest trading partner after the European Union and the US, with bilateral trade of about $37 billion.
The speculation that the package will boost demand from the second-largest oil consumer also pushed crude oil and copper prices as much as 5 per cent higher. Rubber, edible oil, precious metals and other base metals all rebounded from the downtrend in the past few months.
Analysts said commodity prices have risen after a fortnight. Earlier, increases were due to profit-taking by bear operators, but this time real buying is taking place. Apart from the Chinese package, the other favourable factor is the easier liquidity situation. There is also wide expectation that more such measures may be announced before the G-20 meeting this weekend.
The rupee also rose to the highest level in more than a month on speculation that China’s spending plan would boost investor confidence in Asian economies. The rupee advanced 0.6 per cent to 47.38 a dollar at close on Monday.
| MARKETS CHEER THE CHINA SYNDROME | ||||
| Name | Quote units | 7-Nov | 10-Nov | % Change |
| LME Aluminum 3 months | $/MT | 1960 | 2033 | 3.72 |
| LME Copper 3 months | $/MT | 3815 | 4105 | 7.6 |
| LME Nickel 3 months | $/MT | 11560 | 12120 | 4.84 |
| LME Zinc 3 months | $/MT | 1110 | 1160 | 4.5 |
| Gold spot | $/t oz. | 736.65 | 751.71 | 2.04 |
| Silver spot | $/t oz. | 10.07 | 10.31 | 2.38 |
| Crude palm oil Fu* | **MYR/MT | 1609 | 1626 | 1.06 |
| Corn Fu# | $/bu. | 375.5 | 387.5 | 3.2 |
| Brent Crude | $/barrel | 57 | 59.92 | 5.12 |
| Rubber | Yen/kg | 181.2 | 187.9 | 3.7 |
| Soyabean | $/bu. | 9.19 | 9.5 | 3.37 |
| Wheat | $/bu. | 5.19 | 5.32 | 2.5 |
| * Futures Jan 09 # Futures Dec 08 ** Malaysian Ringgit Source: Bloomberg, LME | ||||
Mahesh Vyas, MD and CEO of CMIE, an independent economic think-tank and research organisation, said all these measures would lead to consumption and demand growth. If demand goes up in countries like China, it will stimulate world economies as well.
The stock markets seem to agree. Tata Steel rose 13 per cent, its sharpest gain in more than nine years, and Sterlite Industries gained 14 per cent, its biggest gain this month. Oil and Natural gas Corporation gained 8.8 per cent.
| ASIA | % Chg* |
| Shanghai Composite | 7.27 |
| Nikkei 225 | 5.81 |
| Sensex | 5.74 |
| Hang Seng | 3.52 |
| Kospi | 1.58 |
| EUROPE | |
| CAC 40 | 1.06 |
| DAX | 1.76 |
| FTSE 100 | 0.89 |
| US # | |
| Dow Jones | -0.74 |
| Nasdaq 100 | -1.30 |
| * over previous close # at midnight (IST) | |
Domestic institutions were big buyers today and bought shares worth Rs 377 crore, and foreign institutional investors (FIIs) were net buyers though the amount was a minuscule Rs 92 crore.
The China package and interest rate cuts across the globe changed the short-term outlook leading to short covering. Metals, infrastructure and power companies were the major gainers today on the BSE.
In the London commodity markets, copper for delivery in three months gained $340, or 9.1 per cent, to $4,095, reversing last week’s decline. Bullion for immediate delivery also advanced sharply.
Analysts said the Chinese package is different from those announced by various other central banks including the US Fed.
While the others were bailouts, China will spend to boost infrastructure and consumption that will lead to increase in demand everywhere.
Pradeep Shah, head of IndAsia Fund Advisers, said India is also acting in unified way to address the current crisis, but there is a suggestion that China-type measures could step up demand. “The government should reduce excise duties across board so that demand can go up,” he said.
