China: shares soar 8.5% and have the best day since 2008 – 09/30/2024 – Market

Chinese stocks recorded their best day on Monday (30) since the 2008 global financial crisis, extending a historic rally triggered by Beijing’s robust stimulus package.

China’s blue-chip CSI 300 index, made up of companies listed in Shanghai and Shenzhen, soared 8.5% as investors got ahead of the holiday that will set up the rest of the week for Golden Week celebrations.

The move continued a rally that began last week, when first the People’s Bank of China, followed by the committee led by leader Xi Jinping, promised broad monetary and fiscal stimulus measures to support the country’s declining economic growth.

The rally marks a sharp turnaround for the Chinese market, which has suffered steep declines over the past three-and-a-half years as foreign investors flee over concerns about a slowing economy and a simmering crisis in the property sector.

“We think this stock market rally could go a little further,” said Manik Narain, head of emerging markets strategy at UBS. “I would say from here, an additional 5% to 10% hike would not seem extreme in our view.”

Daily trading volumes were the highest in nine years, according to LSEG data.

The CSI 300 has now risen a total of 24% over five sessions since last Tuesday (24), before the announcement of the stimulus measures. The package, Beijing’s biggest since the coronavirus pandemic, includes a $100 billion reserve from the central bank for investors and companies to buy shares, while the political committee led by Xi Jinping said in a statement it would step up spending.

In Hong Kong, the Hang Seng index closed up 2.4%, driven by Chinese companies listed in the territory, including Alibaba and Tencent. Its year-to-date performance — most of which has occurred in recent weeks — now stands at 24%, higher than the S&P 500 index’s 20% gain.

The rise contrasted with the negative performance of other major Asian markets on the day. Japan’s Nikkei 225 plunged 4.8% in a chaotic session following news that the next prime minister, Shigeru Ishiba, will call a general election for Oct. 27.

Investors said the declines reflected fragile investor confidence in Ishiba, which has previously expressed support for higher taxes on companies and investment income.

India’s BSE Sensex, which has been widely seen as a big beneficiary of nervous investors exiting China, fell 1.5%. South Korea’s Kospi closed down 2.1%.

Gains in the Chinese market also boosted commodity prices, with iron ore futures due in January 2025 and traded on the Dalian Commodity Exchange rising nearly 11%.

However, analysts warned that a lasting rally in China would not be sustained by easing monetary policy alone and called for more details on fiscal stimulus.

“The market needs a ‘1-2-3 strike’ [com o afrouxamento monetário atual como a primeira ação]followed by a large fiscal stimulus, and, most importantly, structural reforms to sustain the rally, rather than a short-term deal,” said Minyue Liu, investment specialist for Greater China and global emerging markets at BNP Paribas Asset Management .

“This Chinese stimulus will likely remain within Chinese borders,” said UBS’s Narain. “After Golden Week ends, perhaps we will see more details on stimulus measures — we are looking for details on measures to support consumption, for example, which are very scarce.”

Collaborated with Leo Lewis in Tokyo