HONG KONG: China and Hong Kong stocks rallied broadly for a second day on Wednesday as investors basked in the afterglow of a wide-ranging stimulus package announced by Beijing the previous day.
China’s blue-chip CSI300 Index jumped 2.1%, following a 4% gain in the prior session, while Hong Kong benchmark Hang Seng advanced 2%, adding to Tuesday’s 4.1% surge.
Beijing unveiled a slate of support measures on Tuesday - the biggest since the pandemic - including rate cuts, mortgage requirement easing, and fresh funding for equity purchases, in a bid to revive activity and stabilise the crisis-hit property market, though analysts noted the absence of any policies to support real economic activity.
In the wake of the announcement, the People’s Bank of China (PBOC) on Wednesday cut the rate of one-year medium-term lending facility (MLF) loans to some financial institutions to 2.00% from 2.30%.
Sell-side analysts and investors note sentiment has picked up strongly given the size of the stimulus and attractive valuation of Chinese stocks, with local investors driving the inflows while some foreign investors also starting to accumulate positions.
“Clearly this was more substantive than expectations and the market believes there could be more,” said Joshua Crabb, head of Asia-Pacific equities at Robeco.
Chinese markets rally after Beijing pledges to slash rates
“Valuations have been cheap so any positive surprise could have an impact. Ongoing support will drive whether this continues,” he said.
Real estate, automobile and brokerage sectors led the gains, climbing 3.7%, 3% and 2.4% respectively. Hong Kong-listed Chinese tech firms went up 2.4%.
“Between now and the ad-hoc Politburo meeting in end-October, in which fiscal measures may be announced to improve demand, the market rally could continue to bring markets higher over the next few sessions,” UBS said in a note.
Meanwhile, China’s yuan rose to a fresh 16-month high on Wednesday and briefly crossed the key 7-per-dollar level offshore, underpinned by investor optimism.