SHANGHAI: Chinese stocks were lifted from multi-year lows on Tuesday by a news report and cabinet pledge flagging support for the country’s battered equity markets, though the mood was fragile following a bruising start to 2024.
The Shanghai Composite hit a four-year low in morning trade, then closed 0.5% higher, while the blue-chip CSI300 closed up 0.4%. Hong Kong’s Hang Seng closed up 2.6%, its largest one-day gain in two months.
All three indexes have performed poorly in January and have lagged world stocks for several years as investors have lost patience with the Chinese economy’s underwhelming post-pandemic performance and a lack of big-ticket stimulus seen in past downturns.
China’s CSI 300 Index is down 47% since it peaked in February 2021 and the HSI has sunk 49%.
China’s cabinet said on Monday it will take forceful and effective measures to stabilise market confidence. Bloomberg News, citing unidentified sources, said policymakers were seeking to mobilise about 2 trillion yuan ($279 billion), mostly from offshore accounts of state enterprises, to fund equity buying through a China-Hong Kong stock exchange link.
Traders’ response was warm but without much conviction.
The purported rescue package “is a welcome measure and shows increasing responsiveness ... but at under 2% of GDP, we fear this is still inadequate,” said Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management.
“I would not be surprised by a short-term boost in sentiment and prices. But I doubt its sustainability unless these are complemented by a broader package of far-reaching reforms.”
The China Securities Regulatory Commission did not respond to a Reuters request for comment, and analysts were also hesitant to cheer.
“We doubt if the size is accurate or the government is decisive enough to mobilise such a big amount for now,” said Bank of America Securities analysts in a note to clients.
“In 2015-16 it took six months for the government to eventually stabilise the market. The market should not expect the move of the National Team to be effective immediately.”
Traders noticed state banks supporting the yuan offshore - spiking yuan rates in Hong Kong - and driving it to 7.1630 onshore and toward its largest percentage gain of the year.
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