China stocks soar to 2-year peaks on stimulus hopes

(Reuters) – Chinese shares soared to two-year highs on Tuesday as mainland markets reopened from a week-long holiday to a flurry of speculation of more stimulus from Beijing.

The blue-chip CSI300 was up 10% in early trade to its highest since mid-2022 and the rose 9.7% and hit its best level since December 2021.

China’s state planner announced $28 billion for spending and investment projects on Tuesday and pledged to quicken fiscal support, expressing full confidence in achieving this year’s economic growth and development targets.

Before entering the Golden Week holiday, Chinese stocks had already been on a tear, with Beijing announcing the most aggressive stimulus measures since the pandemic.

COMMENTS:

RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE

“Markets were hoping to obtain some guidance on the size of fiscal stimulus at this presser – but with MoF not in attendance, it was unlikely this information was going to be provided. Recall market estimates on stimulus ranged between CNY 2 trillion – 10 trillion. A number closer to 10 was needed to sustain the risk rally.

“NDRC Chairman recapped key announcements and pledges with no new information – disappointing the markets.

“What’s next? No major press briefing lined up so far. Thus, it is likely we see markets consolidating and digesting what has already been announced, which arguably is meaningful, but not quite enough to satiate lofty expectations.”

MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE

“We’re seeing a shakeout at the highs of a very strong rally. But when we reach the point of a rally where my neck hurts by looking at it, you could argue a pullback is overdue.

“Either way, it seems some are booking profits after exceptional gains over gold week, and this could deter others from simply stepping in to support the market immediately. And that paves the way for some chop around the top, if not a deeper pullback for China’s markets.”

ROB CARNELL, ING’S REGIONAL HEAD OF RESEARCH FOR ASIA-PACIFIC, SINGAPORE

“I think there’s a lot of expectations for some further meat on the bones of the physical stimulus that’s been talked about a bit recently… talk about consumption vouchers, perhaps more infrastructure spending investment. So I think there’s a sort of expectation that the positive stimulus message that went down very well just before the holidays, is going to get some further additions at this press conference today. Hong Kong’s been open a bit longer. That’s probably more in sync with global equity markets.”

VASU MENON, MANAGING DIRECTOR, INVESTMENT STRATEGY, OCBC, SINGAPORE

“The strong showing today is not a big surprise as the Chinese bourses are probably playing catch-up after both the Tech Index in Hong Kong and the Golden Dragon Index in the US surged by over 10% in the first week of October when Chinese markets were closed for the Golden week holidays.

“There are no clear signs that the Chinese economy is on the mend yet, so this rally is largely sentiment-driven and sparked by Beijing’s stimulus blitz in late September. China’s policy makers are also expected to announce further measures to boost economic growth today and in the coming weeks and hopes of more stimulus have also boosted sentiment and contributed to today’s market upswing.

“Ultimately for the rally to be sustainable, we need to see more fiscal policy and more measures to support the economy and the property market. A great deal of hope has been built into the strong rally in recent weeks and we now need to see additional government policy action to support the uptrend.”

GARY NG, SENIOR ECONOMIST, NATIXIS, HONG KONG

“I think the movement today basically just explains that in the Chinese onshore market, it’s just rising to a level that investors are comfortable with.

“Because no one is really certain about what is going on in the stimulus… there could be a bit of uncertainties about whether it is above or below market expectations.”

JUN RONG YEAP, MARKET STRATEGIST, IG, SINGAPORE

“Mainland China stocks are largely playing catch-up, after being out for the Golden Week holiday over the past week. Optimism around recent stimulus efforts remains at play, although the upcoming policy press conference today will be closely watched for any follow-through from the fiscal side.”

CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE

“So far, the NDRC press conference appears to run short on details with regards to stimulus measures. Hopes were raised but the delivery was disappointing. Post-opening rally in Chinese equities has fizzled out and the lack of follow-through is a setback to sentiments.”