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Chinese stocks rose on Monday after Beijing sought to reassure investors over the weekend about its plan to increase spending to boost the world’s second-largest economy.
The finance ministry said on Saturday that it planned to recapitalise local governments and state banks and buy unsold property as part of its stimulus plans but it held back from providing detailed figures.
Chinese investors, who kicked off a record stock market rally in late September after Beijing announced monetary stimulus, are waiting for the government to reveal its planned fiscal expenditure.
On Monday, mainland China’s CSI 300 benchmark closed up 1.9 per cent, with high-tech manufacturing groups such as Cambricon Technologies, CATL and BYD among those driving the gains in the index.
Markets in Hong Kong declined slightly, with the benchmark Hang Seng index down 0.8 per cent.
“Market opinions clearly diverged after the Ministry of Finance briefing,” said Zhang Qi, analyst with Haitong Securities. But he said some investors were starting to venture back into the market after the rally faltered last week on uncertainty over the government’s stimulus plans.
China has been struggling with what some economists call a “two-speed” economy, with strong exports offsetting soft domestic demand as a deep property crisis undermines household confidence.
There were signs on Monday that the trade engine might also be slowing, with exports in September up 2.4 per cent in dollar terms compared with a year earlier. This was down from 8.7 per cent growth in August and missed a forecast of analysts polled by Reuters of 6 per cent. Imports grew 0.3 per cent compared with a forecast of 0.9 per cent, and 0.5 per cent in August.
Separately, the value of loans issued by Chinese banks also fell short of analyst expectations during September, according to Reuters data, in a sign of weaker than forecast business activity.
Some economists said the finance ministry’s programmes announced at the weekend would help provide a basis for a recovery but they would need to see the details, including how much the government planned to spend and the programmes’ terms.
Others were more positive, believing that the government would make good on its promises in important meetings planned for the coming weeks. These included a session of the standing committee of the rubber-stamp parliament, the National People’s Congress, which can approve new government bond issuance.
“These changes are enough to maintain optimism leading up to the National People’s Congress session,” said Wei Li, head of multi-asset investments of China at BNP Paribas. He said more decisions on stimulus were expected at the Communist party leaders’ meeting on the economy, the Central Economic Work Conference, in December.
Beijing has launched multiple incremental schemes over the past three years since the property sector collapsed, but none have managed to stabilise a deep fall in prices that is hitting household sentiment.
On Thursday, the People’s Bank of China began implementing a scheme to enable domestic financial companies to buy more stocks, the first central bank tool of its kind to shore up stock market liquidity.
The announcement of the tool in late September ignited a market rally that sent stock prices up more than 30 per cent before it cooled off last week.
The finance ministry briefing was followed by data on Sunday showing that deflationary pressures remained strong, one of the chief concerns for economists.
The weekend briefing sent mixed signals, said Winnie Wu, chief China equity strategist at Bank of America Securities on Monday, and the market was now in “long-term greedy and short-term cautious” mode.
“While some investors may be disappointed, it seems to us that the policy pivoting point has occurred,” said Wu. “We should see continued policy momentum in the coming weeks, and potentially more fiscal stimulus and structural reforms in 2025.”