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Chinese stocks hit their highest in more than two years on Tuesday as Beijing pledged more support for the economy and investor expectations for further stimulus remained high.
The mainland blue-chip CSI 300 index opened up 10.8% after being closed since last Tuesday for a week-long holiday. It fell back and was trading 7% higher late in the morning as Beijing stopped short of announcing significant new fiscal stimulus measures.
Investors had expected that Chinese officials would outline further support measures for the economy to complement the monetary stimulus package launched at the end of September. Chinese stocks soared to its best week since 2008.
Hong Kong’s Hang Seng index, open for most of last week, fell as much as 9% in morning trading. after an 11% increase in the previous 5 days.
“Currently [that] The mainland opened up, people sold Hong Kong to get money to buy real goods [mainland Chinese shares],” said an Asian trader who did not want to be named.
China’s policy recovery has restored a level of optimism to the country’s stock market. Global financial institutions including Goldman Sachs, Citi and HSBC have become more optimistic and advance their goals on Chinese equity performance.
Zheng Shanjie, chairman of the National Development and Reform Commission, China’s state economic planning agency, told reporters in Beijing on Tuesday that he was “fully confident” the country would achieve reaching the official annual growth target of about 5%.
He pledged to prioritize consumption and expand domestic demand, as well as deepen support for China’s poor and students.
Zheng also said the Chinese government will continue to issue ultra-long-term government bonds into 2025 – a sign of more support for the economy.
He said the government will advance about 200 billion Rmb ($28 billion) from next year’s budget for spending and investment projects. He also signaled a faster pace of bond issuance to support growth.
But Alicia García-Herrero, chief Asia-Pacific economist at Natixis, said markets would be disappointed by the lack of “new” fiscal spending.
“This is what happens when you feed the monster,” she said. “Every day you need to increase the amount of food or it will turn against you.”
The prospect of China reaching its full-year GDP target is the lowest in decades was called in for suspicion This year, as President Xi Jinping’s administration tries to restore consumer and business confidence in the world’s second-largest economy.
Earlier on Tuesday, the World Bank said it was maintaining its 4.8% growth forecast for China in 2024. The multilateral lender predicts China’s GDP growth will slow next year to 4.3%.
Aaditya Mattoo, chief economist of the World Bank for East Asia and the Pacific, said that stimulus measures of recent weeks “There is no substitute for the deeper structural reforms needed to spur long-term growth.”
“With the early implementation of fiscal policy, most of the measures [and] Proceeds from the bond will be carried over to next year,” he said. “And even then, consumers may not want to splurge because a one-time transfer won’t increase long-term income or address concerns about aging, illness and unemployment.”
