Chinese stocks rallied on Tuesday, with the mainland benchmark CSI 300 Index rising 2.5% to its highest level since early October, and the Hang Seng China Enterprises Index gaining 2.6%. Both indices were among the top performers in Asia, lifted by renewed investor confidence.
Optimism surged as Beijing intensified efforts to support economic recovery, and a private survey indicated that China’s services sector grew at its fastest pace since July. Additionally, China’s top legislative body reviewed a proposal to shift some local government off-balance-sheet debt to official accounts. This would mark the first mid-year increase in China’s borrowing limit since 2015, signaling strong fiscal backing.
Premier Li Hints at Further Economic Support
Premier Li Qiang’s remarks also bolstered market sentiment, as he highlighted that China has “ample room” for fiscal and monetary policy adjustments, allowing flexibility to implement further countercyclical measures if needed. This strengthened Chinese equities, helping them outperform other regional markets on the day.
“Chinese stocks are rallying on positive developments, supported by unexpectedly robust services sector data and a shift in the US election sentiment, which appears to favor Kamala Harris,” said Charu Chanana, chief investment strategist at Saxo Markets. Chanana added that Premier Li’s statements reflect Beijing’s commitment to economic support.
Key Policy Moves to Reduce Local Government Debt
The National People’s Congress Standing Committee convened on Monday to discuss raising local government debt ceilings to address hidden debts, according to Xinhua News Agency. This move aims to ease financial strain on local authorities, potentially boosting confidence among investors concerned about regional debt risks.
Services Sector Rebounds Strongly
China’s services sector showed significant growth in October, with the Caixin China Services Purchasing Managers’ Index (PMI) climbing to 52 from September’s 50.3, its largest increase since March last year. This reading, reported by Caixin and S&P Global, beat economists’ expectations of 50.5, signaling expanding economic activity.
Stocks See Renewed Momentum Amid Policy and Election Developments
After a rally earlier this year, Chinese stocks had lost momentum as investors questioned whether Beijing’s policies were sufficient to support long-term growth. The CSI 300 Index, which surged nearly 35% from a September low through early October, had fallen around 5% until Tuesday’s rally.
Some market analysts attribute the recent stock gains to shifting sentiment in the US election. “The probability of a Trump victory appears to be decreasing,” noted Jinghua Lin, an analyst at Capital Securities Corp. “If Harris is elected, market sentiment may improve due to expected policy continuity.”
With optimism surrounding both domestic policies and international factors, Chinese stocks have shown strong resilience, positioning for potential growth amid global economic uncertainties.
Related topics:
