China Stocks Rally: Hang Seng Hits 2023 High—What's Driving the Surge?
China stocks rallied on Friday, recouping some of Thursday's losses, with the Hang Seng Index closing 2.8% higher overnight in Asia. The gain has put the index on track for its highest closing since January 2023, according to Deutsche Bank analysts.
Key winners included major e-commerce players $JD.com (JD.US)$ and $Alibaba (BABA.US)$ , which rose 7.3% and 3.5%, respectively, alongside a 2.4% rise for gaming giant Tencent. Their American depositary receipts (ADRs) also mirrored this positive momentum in premarket trading on Friday.
Chinese electric vehicle makers showed mixed performance, with Tesla rival BYD rising 5.7%, while $NIO Inc (NIO.US)$ slipped 0.4%. The European Union voted on Friday to impose tariffs of up to 45% on Chinese electric vehicles, part of efforts to reduce reliance on China—a move largely anticipated by Deutsche Bank economists.
Meanwhile, a rally in Chinese stocks gained momentum, driven by an economic stimulus package aimed at revitalizing the struggling economy. As the country's weeklong national holiday concludes, market focus is expected to shift towards whether policymakers will supplement these stimulus measures with further fiscal actions.
The positive market sentiments began with the People's Bank of China's announcement of a 50 basis-point cut to the reserve requirement ratio, along with a 0.2 percentage point reduction in its benchmark policy rate.
Additionally, the central bank lowered rates on existing mortgages by 0.5 percentage points and reduced the minimum down payment on second homes from 25% to 15%. Governor Pan Gongsheng also unveiled plans to boost the stock market by providing liquidity support to institutional investors.
As China's weeklong national holiday ends, investors are keen to see whether policymakers will supplement the recent economic stimulus package with additional fiscal measures. Citi analysts Xiangrong Yu and Xinyu Ji note that the first week back from the holiday and the high-level NPC policy meeting scheduled for late October provide two key opportunities for fiscal policy action.
Citi expects budget revisions to introduce a CNY 2 trillion stimulus and an additional CNY 1 trillion special government bond issuance to finance bank recapitalization through the rest of 2024.
Source: Barron's, Benzinga, moomoo
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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小皮匠 10323 : This wave of growth is not so much the impact of the Fed rate cut, but more like a market sentiment. Only in a market the size of China can the capital exiting the United States be sustained. The industries that this capital can accommodate are limited. The real estate industry is still in the process of destocking, and the public's attitude towards the property market is not optimistic. The automotive industry currently does not have disruptive technology. The international market's policy of imposing tariffs on electric vehicles will offset some of the sentiment of capital inflow into the industry. After all, it's easy to invite capital in but hard to see it go out. The leading companies in livestreaming e-commerce are crashing one after another, reducing the willingness to continue consuming on this platform. However, the demand for consumption is still there, and perhaps only JD.com and Taobao can capture this wave of customers. This may be another reason for the current surge in stock prices!