Chinese stocks experienced fluctuations in early trading on Tuesday as investors debated the sustainability of the recent rally. The CSI 300 Index was down 0.3% as of 10:28 a.m. local time, having previously fallen by as much as 1.4% earlier in the session. This follows a 1.9% increase on Monday. Meanwhile, a gauge of Chinese shares listed in Hong Kong declined by 0.5%.
The market has been marked by volatility in recent days as traders evaluate the viability of the stimulus-driven rally that commenced late last month. Although the extent of Beijing’s planned fiscal measures remains uncertain, media outlet Caixin reported that China may raise approximately 6 trillion yuan ($846 billion) through ultra-long special government bonds over the next three years to support its struggling economy.
Investors have been vocal in their demands for increased fiscal spending following the central bank’s easing actions in late September. During a weekend briefing, officials indicated new measures to support the property sector and hinted at potential government borrowing, but did not provide specific figures.
A growing divide has emerged among global investors regarding the rally’s longevity. Morgan Stanley Wealth Management cautioned against investing in rapidly rising Chinese equities, arguing that current stimulus measures will be insufficient to rejuvenate the faltering economy. Similarly, Wells Fargo Investment Institute expressed skepticism about the rebound’s durability, citing persistent negative sentiment among Chinese consumers.
In contrast, UBS Group AG remains optimistic, suggesting that increased retail investor interest could propel stocks further upward.
Recent economic indicators highlight the pressing need for stimulus. September’s export growth slowed more than anticipated, hampering a trade rebound that had been one of the few bright spots in a weakening economy. Additionally, disappointing loan expansion figures signal ongoing weaknesses in domestic demand.
“We have moved to a modest overweight position based on China’s signals regarding policy stimulus, especially given the current depressed valuations,” strategists from BlackRock Investment Institute, including Wei Li, noted in a recent statement. “However, details remain scarce, and we may reconsider our stance if future announcements fail to meet expectations.”
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