Despite initial optimism following Beijing’s economic stimulus, doubts persist over its ability to resolve China’s structural problems, limiting investor confidence in a sustainable long-term recovery.
Chinese stocks extended their rally boosted by Beijing’s massive monetary stimulus, although optimism elsewhere in the region failed to hold. For example, Hong Kong’s Hang Seng Index added 0.7% to Tuesday’s 4.1% rise, while on the mainland, the China Securities 300 Index rose 1.5% after the previous session’s 4.3% jump.
The CSI 300’s rise on Tuesday followed news of a large stimulus package launched by the People’s Bank of China together with other ministriesdesigned to revive the ailing housing sector, boost credit in the broader economy and support stock prices.
“The measures represent the largest package of stimulus since the pandemic, with the stock market and the troubled housing sector in particular focus,” said Richard Hunter, head of markets at Interactive Investor. “Of course, the measures will also take time to show benefits in the real economy, but the fact that the authorities have finally responded to growing investor demands for economic support has been welcomed,” Hunter added.
TheRaw materials particularly sensitive to construction activity in China continued their rallywith iron ore futures traded on the Dalian Commodity Exchange hitting an intraday high of 730.5 yuan per metric tonne, the highest price since Sept. 2, according to Reuters.
However, there were also signs that the enthusiasm generated the day before may be fading. The price of copper, also closely linked to expectations about China’s economic activity,fell by 1.2%while Brent crude also fell.
Other Asian stock exchanges
Other stock exchanges in Asia failed to maintain their positive momentumwith Japan’s Nikkei 225 down 0.2%, Australia’s S&P/ASX 200 down 0.2% and Singapore’s FTSE Straits Times Index down 1%.
“Investors have begun to question whether any of the stimulus measures announced by Chinese authorities on Tuesday will address the underlying structural issues, despite the euphoria that accompanied the announcement,” said Patrick Munnelly, market strategist at Tickmill Group.
Major Asian stock markets traded mostly lower
Goldman Sachs analysts led by Kinger Lau said the stock market portion of the stimulus is likely toincluding funding for companies to buy back their shares, is supporting stocks at least in the short term. However, as long as the property market remains a drag on sentiment, Chinese stocks will remain a “trade” rather than a long-term investment, according to Goldman.
“We think investors will be reluctant to bet on long-term Chinese growth and will remain tactically involved in Chinese stocks until they feel confident about the scale and effectiveness of the property rescue plan, or see signs that the cycle is coming to an end,” Goldman said.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
