Is this China Bull Run for Real?
The world's second largest economy faces its fair share of challenges since the episodes of Covid-19 and property slump. Last Tuesday China's Central Bank announced its most aggressive stimulus package since pandemic with key measures as below:
1) Lower Reserve Requirement Ratio & Reverse Repo Rate Cut - These measures aim to encourage commercial banks to lend more, injecting liquidity to the system. Lower reverse repo rate also means lower lending rate and it shall stimulate borrowing and investment which lead to economic growth.
2) Loosening of Real Estate Rules - Down-payment requirement for 1st time home buyer has decreased from 20-30% to 15% whereas for 2nd home buyer from 40-70% to 20-30%. This new rule coupled with the cutting of mortgage rate by 0.5% will definitely make house purchase more affordable and it is expected to stimulate the property industry given that real estates forms the backbone of China's economy.
3) Stock Market Stimulus - This includes a swap programme sized at an initial 500 billion yuan that allows funds, insurers and brokers easier access to funding in order to buy stocks as well as 300 billion yuan in cheap loans to commercial banks to help them fund other entities' share purchases and buybacks.
The rollout of the stimulus package has led to a significant rally of China concept stocks. $PDD Holdings (PDD.US)$ $Alibaba (BABA.US)$ etc have seen their share price soar more than 10%. However question remains if this bull run is just short-lived given that its consumer confidence index remains low.
Notwithstanding the policy risk, I would still like to have a small exposure of my investment portfolio in Chinese companies due to the attractive valuation and China is still the world's second largest economy. I also would like to believe that China government is determined this round to do something to save the economy. However, I am not inclined to do individual stock pick and hence I have chosen to invest in ETF due to its diversification and self adjusting feature. I have a small position in $Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR.US)$ which have exposure towards China's A shares. I have also attempted my first option trade on Moomoo which I sold a cash secured put on ASHR recently. Moomoo Malaysia has just launched the feature to trade HK stock market this week and the timing is just perfect for us to explore and look for opportunities in HK markets. ![]()
Thanks for reading and happy investing.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Deltaman099 : It was not the stimulus package. It was from the top authority to help equity market. Before leaders cared less about capital markets but economy was lack of energy to recover no matter what to with real estates.
MonkeyGee : think we will tell by end of next week