Monday, December 16, 2024

China’s Stock Rally Fizzles as Traders Reassess Stimulus Bets

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(Bloomberg) — A rally in onshore Chinese stocks on their return from a week-long holiday fizzled quickly as traders questioned Beijing’s resolve to add more stimulus. Shares in Hong Kong tumbled.

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The benchmark CSI 300 Index was up just about 2% an hour into trading on Tuesday after surging almost 11% in the opening minutes. The measure had gained for nine straight sessions through Sept. 30 before heading into the Golden Week break. A gauge of Chinese shares listed in Hong Kong tumbled almost 10% after having rallied almost 11% in the period that onshore markets were shut.

A Tuesday press briefing from China’s top economic planner — the National Development and Reform Commission — to discuss a package of policies aimed at boosting economic growth had little to offer.

“The durability of this China rally will depend on action following words on the fiscal side of the equation,” said Aleksey Mironenko​​​​, global head of investment solutions at Leo Wealth in Hong Kong. “The key thing we are watching going forward — what policies will be announced in coming weeks following the Politburo and State Council statements? That will determine if our overweight is a tactical one — to be taken off as relative valuations change – or a strategic one.”

The world’s second-largest equity market has had multiple boom-and-bust cycles. Confronted by slowing growth and disinflationary pressures, China swung into stimulus mode in late 2014, setting off an eye-watering stock market rally that spectacularly crashed back to earth in mid 2015. Back then, the nation’s retail traders ramped up leverages and sent the Shanghai Stock Exchange Composite Index more than doubled its level from October 2014 to June 2015. Then the equity gauge plunged more than 40% in two months.

–With assistance from Tian Chen and John Cheng.

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