Out of the doldrums, into the green

DRIVEN by the Chinese government’s efforts to revitalise the economy, China’s stock market saw a significant rally starting in late September 2024, offering a sense of optimism after a prolonged period of stagnation. However, in early October, the market faced significant volatility, reflecting mixed responses to government stimulus measures. The surge, driven by bold but cautious government actions, included interest rate cuts and direct liquidity support for the equity markets, yet investor sentiment has been mixed. Recent announcements from China’s National Development and Reform Commission included a 200-billion-yuan (S$36.9 billion) spending plan, but the lack of detailed fiscal stimulus led to a mixed market reaction.

Despite these short-term ups and downs, the direction of travel is clear. Based on past experience, low valuations and extreme pessimism, combined with improving economic and corporate fundamentals in six to 12 months’ time, a bull market will be the natural order of things.

We believe a multiyear bull market has already begun in September, but the market would be volatile in the first phase of this bull run because there is still scepticism among investors, after having experienced several false dawns in the last two years.