China's Mighty Markets Get Silenced as Congress Drags On

(Bloomberg) -- It’s awfully quiet in China’s financial markets.

Stocks, bonds, the currency -- all have traded sideways this month. The Shanghai Composite has eked out a gain of less than 1 percent, the yield on 10-year government debt has traded in a range of two basis points on a closing basis, and the yuan is the least volatile currency in Asia this week.

It’s not like there’s a shortage of catalysts to move markets: growing risk of a trade war with the U.S., stacks of company earnings, better-than-expected economic data, an ongoing deleveraging campaign that’s pushed up borrowing costs. Yet the dullness underscores the primacy of a two-week meeting of China’s legislature, in particular its vote to allow President Xi Jinping to rule indefinitely.

While the subdued trading may not be a surprise --- funds were seen rushing to sell stocks at the end of February before a temporary ban was imposed, according to people familiar with the matter -- the suppression of trading may aggravate volatility once the National People’s Congress ends Tuesday. Bonds in particular are seen in the firing line as liquidity, kept ample during the meeting, is expected to tighten again.

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