Chinese stocks continued their upward trajectory on Wednesday, driven by investor confidence that Beijing’s recent stimulus initiatives will revitalize the struggling economy. The onshore benchmark CSI 300 Index soared by as much as 3.4%, positioning it to recover all its losses for 2024. This rally followed the government’s announcement of a series of measures aimed at enhancing liquidity in the stock market, reducing interest rates, and relaxing home-buying regulations. Similarly, the Hang Seng China Enterprises Index also rose by 3.4%, building on a robust 5.1% gain from the previous session.
Today’s rebound underscores investors’ recognition of the urgency expressed by policymakers, particularly reflected in the comprehensive nature of the stimulus package. The flurry of policy announcements has ignited hopes that the government may be preparing to tackle deeper issues, such as faltering consumer confidence, especially with the Politburo set to convene ahead of the upcoming weeklong annual holiday starting on October 1.
In a significant move, the People’s Bank of China announced on Tuesday its plans to establish a swap facility, enabling securities firms, funds, and insurance companies to access central bank funds for purchasing equities. The central bank is also considering the implementation of a stock stabilization fund. Additionally, the securities regulator has issued draft guidelines encouraging listed companies to enhance investment returns.
Chaoping Zhu, a global market strategist at JP Morgan Asset Management, commented in a report, “We believe these coordinated policy announcements could pave the way for further policy support and raise the possibility of an economic upcycle in 2025.” He noted that with improvements in profit margins and corporate fundamentals among private sector companies, there are significant value opportunities in Chinese equities, especially in light of the high valuations in global markets.
The HSTECH Index, which tracks the 30 largest tech companies listed in Hong Kong, surged by as much as 3.8%, marking a more than 20% gain since hitting a low in August. A Bloomberg Intelligence index measuring developer shares also experienced a notable increase, rallying by as much as 5.1%.
Related topics:
