Chinese stocks edge up on stimulus hopes

Chinese stocks rallied sharply on Wednesday, with the CSI 300 Index experiencing its best day in nearly six months, fuelled by growing expectations of government stimulus measures to bolster the struggling economy.

The benchmark index surged 2.2 per cent, while the Hang Seng China Enterprises Index climbed as much as 2.4 per cent.

The rally was underpinned by the recent Politburo meeting, which emphasised the importance of boosting consumer spending and hinted at potential counter-cyclical adjustments.

Many investors are now viewing the situation optimistically, anticipating further counter-cyclical policies, said Redmond Wong, a market strategist at Saxo Capital Markets in Hong Kong.

The expectation of a September rate cut from the Federal Reserve meeting later on Wednesday has also lifted sentiment, he added.

China’s national team is showing support for the equity market once again. State-related fund managers have been buying contracts, causing a 2 per cent increase in some cases during the morning session.

This move is unusual and may have been prompted by initial investor disappointment with the Politburo meeting reports, according to market participants.

It is uncertain if Wednesday’s increase is a temporary recovery or a lasting revaluation. Recent policy-driven recoveries have not been enduring due to insufficient support to revive the property market or stimulate consumer spending.

The CSI 300 index suffered a decline of 0.6 per cent in July, marking its third consecutive month of losses and positioning it as one of the region’s worst-performing major equity indexes.

The Hang Seng Index is also on track for its steepest monthly decline since January.

Shen Meng, a director at Beijing-based investment bank Chanson & Co., expressed optimism about the Politburo’s pledge for more substantial stimulus measures but cautioned that their impact on the economy may be limited.

Attribution: Bloomberg