Chinese stocks overcame a bout of early volatility to post their biggest gain in a week on Monday, suggesting that investors are hopeful the government will deliver on its promise of more fiscal support.
At a much-anticipated briefing on Saturday, Finance Minister Lan Fo’an vowed new steps to support the property sector and hinted at greater government borrowing. While authorities refrained from giving a headline dollar figure that investors had sought, Goldman Sachs Group Inc. saw the latest measures as a sign of increased policy focus on growth. It upgraded its forecasts for China’s economic expansion in 2024 and 2025.
The CSI 300 Index closed 1.9% higher, taking its advance from a September low to 25%. The move helped resuscitate China’s historic stock rally after it stumbled last week. A Shanghai Stock Exchange gauge of property stocks surged 4.7%. Early trading in the US didn’t confirm the risk-on move, with the Nasdaq Golden Dragon China Index losing 0.7% at 9:46 a.m. in New York.
Revved up fiscal spending is still seen as holding the key to sustaining the rebound ignited by the central bank’s stimulus blitz in late September. Traders are betting that the Standing Committee of the National People’s Congress, China’s top legislature, will approve extra budget funding at its meeting later this month.
“The Ministry of Finance’s forward guidance worked to a degree by hinting at a substantial new package on the horizon at the central government level,” said Homin Lee, senior macro strategist at Lombard Odier. “Onshore retail investors will probably maintain their hopeful mode in the very near-term, but that might not be sustained if the government delays its stimulus delivery further to December.”
China’s latest economic data is underscoring the need for authorities to do more. Figures released on Sunday showed deflationary problems became more entrenched in September, with consumer prices still weak and factory gate prices continuing to fall. Trade data released after Monday’s market close showed exports — which have been a rare bright spot — rose much less than expected last month.
In Hong Kong, an index of Chinese shares closed 0.5% lower, adding to a 6.6% slide last week. It surged more than 30% in the previous three weeks.
