Following Beijing’s announcement of an economic stimulus programme that included a $114 billion war chest to support the stock market, Chinese equities are expected to have their best week since 2008.
The CSI 300 index of companies listed in Shanghai and Shenzhen has experienced a weekly gain of about 15%, marking the highest level of performance since November 2008, when China unveiled a comparable stimulus package in reaction to the global financial crisis.
The demonstration takes place as China’s authorities scramble to prop up the nation’s financial markets, defuse a real estate sector meltdown, and increase domestic demand in order to hit the country’s 5% annual economic growth objective.
The People’s Bank of China announced on Tuesday the creation of a Rmb800 billion ($114 billion) leading pool for the nation’s capital markets. This pool includes money to lend to non-bank financial institutions like insurers so they may purchase local stocks, as well as money to firms so they can buy back their own shares.
The CSI 300 index increased 3.8% on Friday, while the Hang Seng index in Hong Kong gained 2.8%. This is the largest weekly gain since August 2007, when the index reached record highs just before the global financial crisis. Since the beginning of the week, the index has gained over 12%.
The recent interest rate decrease by the US Federal Reserve would also be a major tailwind, according to Nicholas Yeo, head of Abrdn’s China equities, who stated in a note that “we are at a pivotal moment for the Chinese economy and its equities market.”
“Consumption is expected to rise as a result of global easing conditions, which is good news for China, the world’s largest exporter”, he added.
Additionally, hopes for additional stimulus in China have boosted European markets. Thursday saw the region’s Stoxx 600 close at a new high, driven higher by luxury companies that stand to gain from increased Chinese consumer spending. China’s economic stimulus will also be buoyed by the jumbo interest rate cut decision by the US Federal Reserves-the will stimulate consumer spending and demand for Chinese-made products.
