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[SINGAPORE] Chinese stock-index futures rallied in Singapore after the government unveiled targeted measures to boost the economy.
Contracts on the FTSE China A50 futures expiring in October surged 7.5 per cent at 9:02 am local time. China's financial markets were closed from Oct. 1-7, during which Hong Kong's Hang Seng China Enterprises Index jumped 11 per cent, led by oil companies and automakers. The government cut a tax on passenger- vehicle purchases, while the People's Bank of China reduced the minimum home down payment for first-time buyers.
China's official purchasing managers' index rose to 49.8 in September. While the index showed manufacturing stabilising, it remains below the 50 level that indicates an expansion. Policy makers are increasing targeted stimulus after five interest-rate reductions since November failed to reverse an economic slowdown. The government lowered a property down-payment requirement for the first time in five years, while support measures for the auto industry followed five straight months of declining sales. The odds of a Federal Reserve interest-rate increase this month fell below 10 per cent after reports in the US last week showed the pace of hiring slowed in September and wage growth stalled.
Bocom International Holdings Co's strategist Hao Hong recommends using any rally in China's stocks to sell as targeted stimulus isn't enough to revive the bull market. He says the Shanghai gauge needs to fall a further 18 per cent to 2,500 before it's cheap enough to buy, while the average estimate from eight other strategists compiled by Bloomberg implies a 12 per cent rally by year-end.
Traders have cut bearish wagers on the Deutsche X-trackers Harvest CSI 300 China A-Shares exchange-traded fund to a seven- month low amid expectations the latest policy efforts to stimulate the Chinese economy and the postponement of a US rate increase will help stabilise the mainland stock market. The Shanghai Composite tumbled 29 per cent last quarter, the biggest slump since 2008.