Chinese stocks have demonstrated resilience, continuing their upward trajectory after navigating through initial fluctuations today. This performance indicates that recent government fiscal support initiatives are making a significant impact, at least for the time being.
The CSI 300 Index surged by as much as 2.4% after experiencing a tumultuous morning, ultimately recovering from its worst weekly performance since late July recorded the previous Friday. Additionally, a gauge that tracks Chinese property developers showcased an impressive rise of over 3%, reflecting a growing sense of cautious optimism within the market.
The uptick in stock prices highlights a renewed confidence among traders, who are eagerly anticipating more comprehensive details regarding the government’s fiscal measures. Finance Minister Lan Fo’an recently hinted at future steps aimed at bolstering the struggling property sector, along with a potential increase in government borrowing. Despite these encouraging signs, specifics regarding the fiscal support lacked clarity and a distinct financial figure was not disclosed during the Saturday briefing.
HSBC Holdings Plc’s economists expressed a guarded optimism, noting, “Despite no significant fiscal stimulus announcement, the remarks from the Ministry of Finance came as a pleasant surprise. The shift in policy direction appears to be a lasting change, fostering improved risk appetites and contributing to a wealth effect in the stock and property markets.”
In Hong Kong, Chinese stocks reversed a previous decline of 2.7%, buoyed by these developments. However, data released on Sunday revealed that China is grappling with persistent deflationary challenges, with weak consumer prices and decreasing factory gate prices evident as of September. Furthermore, officials across various sectors specified their commitment to escalating policy support for businesses in follow-up discussions.
During the Saturday briefing, local government representatives stated that special bonds would be allocated for purchasing unsold properties, further hinting at the possibility of issuing more sovereign bonds. This indicates a significant potential revision to the budget, a move that could materialize in the coming weeks.
Prior to the weekend developments, analysts and investors surveyed by Bloomberg anticipated a substantial fiscal stimulus package—potentially as high as 2 trillion yuan (approximately $283 billion)—with suggestions of subsidies and consumption vouchers aimed at families with children. However, market volatility surged in anticipation of the Ministry of Finance’s announcements, especially after the CSI 300 Index experienced a notable decline of 3.3% the week before.
Some market observers remain cautious, fearing that the recent rally may not sustain momentum. The stock market has a history of oscillating gains and losses, often tied to Beijing’s incremental approach to economic stimulus. “Given the upcoming U.S. elections in November and the Federal Open Market Committee’s decisions, large-scale stimulus might be postponed until December or later. Consequently, investors may adopt a more cautious stance ahead of significant third-quarter results, which could limit substantial upside in the near term,” noted Xin-Yao Ng, an investment director at abrdn Asia Ltd.
In summary, while Chinese stocks are currently enjoying a rebound supported by government initiatives, the market remains vigilant as traders await further clarity on fiscal measures and assess potential impacts on economic recovery amid persistently low consumer prices. This blend of opportunity and caution suggests that investors should stay alert and informed in the coming weeks as the situation continues to evolve.