Connect with us

    Hi, what are you looking for?

    News

    Chinese Stocks Surge Following Government’s Economic Stimulus Announcements

    On Monday, Chinese stocks experienced their biggest single-day increase in a week, reflecting a renewed sense of investor confidence that the government is set to deliver on its promise of increased fiscal support for the struggling economy. The CSI 300 Index ended the day with a gain of 1.9%, continuing its upward trajectory and marking a 25% recovery from the lows seen in September.

    This improvement in market sentiment was primarily influenced by Finance Minister Lan Fo’an’s remarks made over the weekend, where he pledged additional support for the beleaguered property market and suggested a likely increase in government borrowing.

    While the specific financial details that many investors were looking for were not provided, analysts from Goldman Sachs Group Inc. interpreted the proposed measures as an indication of a heightened commitment to stimulating economic growth. Consequently, the firm revised its projections for China’s economic growth in 2024 and 2025. The response in the property sector was particularly vigorous, with a property index on the Shanghai Stock Exchange rising by 4.7%. Investors now expect that the Standing Committee of the National People’s Congress, China’s highest legislative body, will approve further budget allocations later this month, adding to the rally initiated by the stimulus measures introduced by the People’s Bank of China in late September. “The Ministry of Finance’s forward guidance has had some effect by signaling a substantial new package at the central government level,” remarked Homin Lee, a senior macro strategist at Lombard Odier.

    “However, should the government postpone the implementation of stimulus measures until December, enthusiasm in the market could fade.” Recent economic data released over the weekend highlights the pressing need for increased governmental intervention. Consumer prices are experiencing deflationary pressures, and producer prices continued to decline in September. Additionally, trade statistics revealed that exports—one of China’s few economic silver linings—expanded at a slower pace than anticipated last month. In contrast, the market reaction in Hong Kong was more subdued, with the index of Chinese shares closing 0.5% lower after a significant 6.6% decline the previous week. Analysts indicate that market volatility may remain, particularly if large-scale fiscal stimulus plans are postponed until year-end.

    At Saturday’s conference, Minister Lan emphasized that local governments would be permitted to utilize special bonds to buy unsold properties and hinted at the possibility of issuing more sovereign bonds. He also noted initiatives to alleviate local governments’ debt burdens, suggesting a potential reassessment of budgets in the forthcoming weeks. Although a major fiscal stimulus figure was lacking, economists at HSBC Holdings Plc, led by Jing Liu, characterized the government’s announcements as an “upside surprise.” They observed that the policy changes seem to be yielding results, with an improved risk appetite positively impacting both stock and property markets. Despite the initial positive market response, analysts remain cautious regarding whether this rebound will translate into a lasting recovery. China’s markets have exhibited patterns of gains followed by reversals in recent years, as investors have reacted to Beijing’s cautious approach to economic stimulus.

    “The Ministry of Finance has implemented measures within their capacity to instill confidence in the market,” stated Xin-Yao Ng, investment director at abrdn Asia Ltd. “However, the upcoming U.S. elections and Federal Open Market Committee meetings in November could delay the introduction of larger stimulus measures until December or later, leaving investors anxious and limiting short-term gains.”

    Image Source: FOTOGRIN / Shutterstock

    You May Also Like

    Stocks

    As gasoline and vitality prices improve world wide and particularly in the US, the pursuit for renewable vitality sources has change into much more...

    Stocks

    Kellogg, one of many largest suppliers of packaged meals in the US and the world, has maintained a usually consolidated management of all of...

    Stocks

    As fears of inflation are affecting your entire United States financial system, one sector that’s taking over the brunt of the injury is the...

    Stocks

    Again in April, Tesla and SpaceX CEO Elon Musk made main waves when he introduced his intent to buy the social media platform Twitter...