CHINESE stocks and the yuan rose sharply after Beijing signalled fresh support for the struggling economy, including further easing of policy curbs in the troubled property sector.  

The Hang Seng China Enterprises Index, which tracks major Chinese companies listed in Hong Kong, gained as much as 4.4 per cent, the most since Jun 2. The onshore yuan gained as much as 0.6 per cent, while the dollar bonds of Chinese builders also rallied.

China’s top leaders on Monday (Jul 24) pledged to boost consumption and offer more support for the troubled property sector to help revive a slowing economy. While it fell short of announcing large-scale stimulus, the statement from the ruling Communist Party’s 24-member Politburo indicates a stronger recognition of the economic challenges, with strategists saying Beijing is showing more resolve to boost growth.

“Its all about the meeting,” said Willer Chen, senior analyst at Forsyth Barr Asia. “The tone is better than feared with positives seen in strengthening counter-cycle adjustment, boosting investor confidence and optimizing real estate policies.”

On the mainland, the benchmark CSI 300 Index of shares climbed 2.2 per cent, the most since Feb 20. Overseas investors were net buyers of about 10 billion yuan (S$1.86 billion) of mainland stocks via trading links with Hong Kong so far in Tuesday’s session.

Beijing’s latest pledge to lift the housing sector out of a severe slump also triggered a rebound in developers’ US dollar bonds, led by those from Country Garden Holdings, one of the country’s biggest builders.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

In contrast, yields on the benchmark 10-year government bond rose to 2.65 per cent, the highest in about a month, as traders sold haven assets amid the broader rally.

The yuan was also supported by a strong reference rate by the central bank, while traders reported that state-owned banks were seen selling US dollars for yuan in the onshore market.

“The Politburo is being quite direct addressing market concerns, and there are new messages which could be quite significant, even though the actual impact would be dependent on follow-up policy actions,” said Xiaojia Zhi, head of research, Credit Agricole CIB Hong Kong Branch. BLOOMBERG