Chinese stocks experienced a notable pullback as a highly anticipated joint briefing from various ministries regarding support for the property market fell short of significant new stimulus measures. Initially, there was a sense of optimism as the market saw gains, but this enthusiasm quickly faded.
As of 11:18 AM, the CSI 300 Index reported a slight decline of 0.1%, reversing a 1.3% increase earlier in the day. Furthermore, a specific index tracking Chinese developers saw a steep drop of over 8%. In a similar vein, the Hang Seng China Enterprises Index diminished its rise to less than 1%.
Housing Minister Ni Hong shared that the country plans to broaden a program aimed at bolstering “white list” projects, increasing the funding from approximately 2.23 trillion yuan to nearly 4 trillion yuan ($562 billion). These measures represented some of the most concrete actions taken during the briefing. However, the context was set previously by sensational headlines suggesting the government would soon deliver impactful responses to economic challenges, leading investors to have heightened expectations.
The lukewarm market reaction signals that investors have set a high threshold for satisfaction, indicating that simply reiterating existing fiscal policies may not suffice to reignite a faltering rally. This skepticism arises from previous government announcements that prompted sharp and volatile market responses without detailing concrete spending plans.
Vey-Sern Ling, managing director at Union Bancaire Privee, noted that while investors are looking for major headline figures to lift stock prices, the government’s strategy appears to focus more on a gradual recovery for both the economy and the housing sector. This discrepancy suggests ongoing press briefings could continue to disappoint if substantial new policies are not introduced.
Upcoming economic data, expected to show a year-on-year growth of 4.5% for the third quarter, is crucial as it could illuminate the efficacy of stimulus measures that have been implemented. This projected growth, the slowest since March 2023, has sparked discussions on whether current efforts are enough to revitalize a sluggish economy.
Some investors remain hopeful for a resumption of stock market gains as the CSI 300 Index approaches a possible correction. However, any delay in market recovery could evoke memories of previous false starts that have left traders cautious.
According to Shen Meng, director at the Beijing-based investment firm Chanson & Co., even though some new policies were mentioned, they are insufficient to give the market a sense of breakthrough. A continued decline in investor confidence and overall sentiment remains apparent, increasing pressure on Beijing to enhance policy support in the near future.
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