Chinese stock markets rallied following a weekend briefing from the Finance Ministry, which announced plans for increased support for the struggling property sector and indicated potential government borrowing to strengthen the economy. Onshore equities saw gains alongside benchmarks in South Korea and Australia, while Japan’s markets were closed for a holiday. In contrast, Hong Kong shares fell, and the Chinese yuan depreciated against the U.S. dollar, following similar trends in the Australian and New Zealand currencies. U.S. stock futures also saw a decline.
Investors are now focusing on an upcoming major policy briefing from the Communist Party-controlled parliament, which oversees the budget, where further stimulus measures are expected. A comprehensive package of initiatives unveiled in late September had already triggered a significant rally in Chinese equities.
Erin Xin, an economist at HSBC Holdings Plc for Greater China, commented, “Beijing has demonstrated a heightened urgency and determination to achieve this year’s annual targets through a series of recent policy measures. However, we can expect more, with a more detailed fiscal package anticipated soon.” She suggested that additional fiscal support could be significant, potentially reaching the multi-trillion RMB mark, with important meetings scheduled for later this month.
Ahead of the weekend briefing, investors had been looking for more fiscal initiatives to maintain the momentum initiated by the stimulus measures rolled out in late September. The CSI 300 Index, a crucial benchmark for onshore equities, reported its largest weekly decline since late July on Friday, while the Australian and New Zealand dollars—often seen as indicators of market sentiment towards China—declined for the second consecutive week.
“Investors need to be patient concerning the size of the fiscal stimulus package,” noted Carlos Casanova, senior Asia economist at Union Bancaire Privee SA. “We could see some figures released before the month concludes,” but he cautioned that Beijing officials may not pursue a drastic approach to revitalizing the economy.
Meanwhile, in the U.S., the S&P 500 surpassed 5,800 on Friday, marking its 45th record in 2024 as major banks rallied following JPMorgan Chase & Co.’s unexpected rise in net interest income.
The U.S. dollar gained strength on Monday after climbing for a second week as traders recalibrated their expectations regarding the timing of Federal Reserve interest rate cuts. The Treasury curve steepened for a second consecutive day, with yields on the two-year note holding steady at 3.96%, while the yield on the 10-year bond rose by 4 basis points to 4.1%. Cash Treasuries remained closed in Asia due to the holiday in Japan.
In Singapore, the Monetary Authority decided to keep its monetary policy unchanged for the sixth straight review, while oil prices experienced a decline.
This week, investors are anticipating key economic indicators, including growth and retail sales data from China, along with inflation figures from New Zealand, Canada, and the UK. Central banks in Thailand, the Philippines, and Indonesia are also expected to announce policy decisions ahead of the European Central Bank’s meeting later this week.
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