Key Points
- Chinese stocks experienced a major rally, driven by Beijing’s aggressive stimulus measures.
- Property stocks and consumer staples led the gains, with the CSI300 up 8.48% on Monday.
- For the month, the CSI300 is on track for an 18% rise, its best since 2014, while the Shanghai Composite and Hang Seng also saw significant gains.
- Beijing’s measures included mortgage rate cuts, property market support, and tools to boost capital market liquidity.
Chinese stocks extended their rally on Monday, driven by Beijing’s aggressive stimulus measures to combat the country’s economic slowdown. Mainland stocks are now on track for their best monthly performance in nearly a decade, following last week’s record-breaking surge. The CSI300 blue-chip index climbed 314.17 or 8.48% to 4,017.85, while the Shanghai Composite Index jumped 248.97 or 8.06% to 3,336.50. The Hang Seng Index also saw significant gains in Hong Kong, rising 501.38 or 2.43% to 21,133.68.
The market momentum was bolstered by China’s central bank announcing new policies to stabilize the struggling property market. Late Sunday, the People’s Bank of China (PBOC) instructed banks to lower mortgage rates for existing home loans before the end of October. Key cities like Guangzhou also lifted all home purchase restrictions, while Shanghai and Shenzhen eased property buying curbs.
These actions helped mainland-listed property stocks surge by 6.4%, while the Hang Seng Mainland Properties Index soared by 88.88 or 6.41% to 1,475.09. Consumer staple stocks also benefited, rising 7%, while the smaller Shenzhen index soared 1,014.89 or 10.67% to 10,529.76.
For the month, the CSI300 index is on track to post a gain of over 18%, marking its best monthly performance since December 2014. Similarly, the Shanghai Composite Index is heading for a 14.8% increase, its highest since April 2015. The Hang Seng Index, meanwhile, is eyeing a 14.7% rise for September, its strongest monthly gain since November 2022.
Eli Lee, chief investment strategist at the Bank of Singapore, noted, “A coordinated stimulus blitz suggests that China has reached a ‘whatever it takes’ moment with economic risks reaching Beijing’s pain threshold.” While it’s still early to predict a sustainable bull market, Lee did not rule out the possibility of Beijing continuing to deliver sizable stimulus packages that can successfully reverse the economic downturn.
The surge in Chinese equities follows several aggressive stimulus measures rolled out last week, including major rate cuts and increased fiscal support. Investors concerned about China’s growth prospects responded positively to the announcements, reigniting confidence in the market. The PBOC also introduced new tools to boost capital markets, including a swap program that allows funds, insurers, and brokers easier access to funding for stock purchases.
The CSI300 index soared nearly 16% last week, while the Shanghai Composite jumped almost 13%. Both indices recorded their largest weekly gains since 2008, while the Hang Seng Index posted its biggest weekly rise since 1998.
