Chinese stocks overcome early swings to cap best day in a week
Concern may grow that the latest rebound may be another false dawn, as Beijing’s piecemeal approach to stimulus having produced only brief rebounds
CHINESE stocks rebounded from their worst week since late July as Beijing reinforced its commitment to shoring up the economy with a fiscal support plan.
The CSI 300 Index ended the trading session on Monday (Oct 14) up 1.9 per cent – its biggest gain in nearly a week – after swinging between gains and losses earlier.
A Bloomberg Intelligence gauge of Chinese developers increased more than 4 per cent, before paring the advance to a little more than 1 per cent.
The price moves have underscored cautious optimism, as traders await more details on the fiscal measures.
Chinese Finance Minister Lan Fo’an promised new steps to support the property sector and hinted at greater government borrowing at the briefing last Saturday, but fell short of giving a headline dollar figure.
Revved-up fiscal spending is seen as holding the key to sustaining the stock market rally, ignited by the central bank’s stimulus blitz in late September.
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“Despite no large fiscal stimulus number, the MOF (Ministry of Finance) press conference was still an upside surprise to us,” HSBC Holdings economists said.
“The policy pivot looks very much here to stay, with the improving risk appetite creating a wealth effect in both the stock and property markets.”
In a separate briefing on Monday, officials from various Chinese departments vowed to step up policy support for businesses.
Data on Sunday showed China’s deflationary problems became more entrenched in September, with consumer prices still weak and factory gate prices continuing to fall.
Local governments will be allowed to use special bonds to buy unsold homes, Lan and his deputies said at the Saturday briefing, without giving an amount.
He hinted at room for issuing more sovereign bonds and vowed to relieve the debt burden of local governments, signalling a possible rare revision to the Budget that could come in the next few weeks.
Prior to the weekend, investors and analysts surveyed by Bloomberg had expected China to deploy as much as two trillion yuan (S$369 billion) in fresh fiscal stimulus on Saturday, including potential subsidies, consumption vouchers and financial support for families with children.
Market volatility had risen in the run-up to the finance ministry’s briefing, with the CSI 300 Index sliding 3.3 per cent last week.
As the rally cools, concern may grow that the latest rebound may be yet another false dawn. The market has been caught in a start-stop cycle of gains and losses a few times before, as Beijing’s piecemeal approach to stimulus produced only brief rebounds.
“I suspect November’s US election and the FOMC (Federal Open Market Committee) could delay large stimulus to December or later, and investors might stay away before that and third-quarter results, so upside could be a bit capped for now,” said Ng Xin-Yao, an investment director at abrdn Asia. BLOOMBERG
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