(Bloomberg) — Chinese stocks started Tuesday’s session with a bang — the benchmark rose 11% after trading resumed after a holiday weekend. But the interest faded as the day progressed, with the lack of major stimulus from the main policy meeting disappointing investors.
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In the end, the CSI 300 Index only finished 5.9% higher. In Hong Kong, China shares fell more than 10%, erasing almost all gains as mainland markets closed on Golden Week.
Expectations for the opening have been due to the meeting of the listed shares in Hong Kong, reports of the opening of major Chinese accounts in preparation for Tuesday’s session and hopes that the press release issued by the country’s main financial institution will provide more encouragement. .
“The meeting defied our expectations and investors’ expectations,” Michael Hirson and Houze Song of 22V Research LLC wrote in a note. “Although Beijing wants to revive the economy, it feels no pressure to abandon monetary restrictions to support the real economy.”
The CSI 300 Index rose for nine straight sessions through Sept. 30 ahead of Golden Week, fueled by a blitz of stimulus that included interest rate cuts, freeing bank funds and support for stocks. That prompted Wall Street giants including Goldman Sachs Group Inc., HSBC Holdings Plc and BlackRock Inc. lifting a market that had fallen while it had fallen amid a resurgent bet.
Tuesday’s rally helped the rally close to its closest level since July 2022, and some market watchers are already warning of stocks reaching a critical point. The index is trading at 13.3 times one-year forward earnings versus a five-year average of 11.9.
The burning of the A-share market and the Chinese government’s reaction to the policy stimulus announced recently are among the risks that investors should watch during the Chinese market rally, Morgan Stanley strategists including Laura Wang in Hong Kong wrote in a research note. . This adds to the skepticism previously expressed by some economists and investment managers who said they were waiting for Beijing to back up its stimulus promises with real money.
“The stability of China’s rally will depend on what happens in the economy,” said Aleksey Mironenko, global chief financial officer at Leo Wealth in Hong Kong. “The most important thing we see going forward – what policies will be announced in the coming weeks following the statements of the Politburo and the State Council?”
“This will determine whether our weighting is wise – to be removed if the price changes – or not,” he added.
Tuesday’s session saw turnover in Shanghai and Shenzhen rise sharply to 3.43 trillion yuan ($486 billion). This surpassed the previous record seen on September 30, when the CSI 300 Index rose 8.5% for its biggest one-day performance since 2008.
A number of businesses have seen their business software freeze temporarily amid the high volume, Cailian said, citing an IT specialist at one leasing company.
The officials of the National Development and Reform Commission said that they will speed up the use of funds, while in particular they review the policies to increase the income and increase the direct assistance to the low income groups and the new graduates. He also said that China will continue to issue sovereign bonds next year to support major projects and bring in 100 billion yuan in key sectors planned from 2025 to this year.
China’s leaders aim to expand by around 5% this year, but economic data in recent months suggest that this may be difficult to achieve as consumer spending remains sluggish and output shortages persist.
Stocks in Hong Kong also edged higher even as Chinese shares listed in the city tumbled as the stock market rallied. The drop in the Hang Seng China Enterprises Index came after it jumped more than 30% in the past month through Monday, making it the best performer among more than 90 global gauges tracked by Bloomberg.
“There is another shift in the markets – a shift from Hong Kong to China,” said Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong. “The A-sections are the ones who will benefit from domestic incentives.”
The second largest financial market in the world has been very competitive. Faced with slow growth and declining energy, China went into stimulus mode at the end of 2014, triggering a stock market rally that crashed into the world in mid-2015. The Shanghai Stock Exchange Composite Index doubled. twice its level from October 2014 to June 2015, but fell more than 40% in two months.
“We need money, and then we hope for a big change in the economy,” Eva Lee, head of Greater China equities at UBS Global Wealth Management in Hong Kong, told Bloomberg Television. “By the end of this year, if we don’t have a major strategy, we’ll probably end up here.”
The Chinese yuan rebounded from losses earlier in the session as the benchmark, which had been closed for five sessions, traded 0.5% lower to 7.0558 per dollar on the holiday trip. Yields on the country’s benchmark bond initially rose seven basis points before settling at 2.20%.
–With help from Tian Chen, John Cheng, Sangmi Cha, April Ma and Joanna Ossinger.
(Repetition.)
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