EZ SQUARE

China stocks set for best month in nearly a decade on stimulus cheer

2024-09-30 14:40:08

SHANGHAI/SINGAPORE (Reuters) - Chinese stocks extended a blistering rally on Monday with those in the mainland headed for their best month in almost a decade, as Beijing rolled out further stimulus measures to arrest a slowdown in the broad economy.

Benchmark indexes in mainland China began the week on a solid footing after clocking their best weekly performance in nearly 16 years on Friday, with the CSI300 blue-chip index last up more than 6.22%.

The Shanghai Composite Index jumped 5.7%, while Hong Kong's Hang Seng Index rose 3.34%.

Shares of property companies rose sharply in response to China's central bank late on Sunday saying that it would tell banks to lower mortgage rates for existing home loans before Oct. 31, as part of sweeping policies to support the country's beleaguered property market.

Adding to efforts to reverse the property downturn, Guangzhou city announced the same day the lifting of all restrictions on home purchases, while Shanghai and Shenzhen eased curbs on buying.

"The market is still surprised by China's policy support and momentum is still continuing," said Kenny Ng, strategist at China Everbright (OTC:CHFFF) Securities International in Hong Kong.

Mainland-listed property stocks advanced 6.4%, while the Hang Seng Mainland Properties Index charged 8.4% higher.

Shares of consumer staples last traded 7% higher. The smaller Shenzhen index soared 8.2%.

For the month, the CSI300 index was eyeing a gain of more than 18%, its best performance since December 2014. The Shanghai Composite Index was similarly on track to end September with a 14.8% increase, its most since April 2015.

The Hang Seng Index was set for its best month since November 2022 with a 14.7% rise.

"A coordinated stimulus blitz suggests that China has reached a 'whatever it takes' moment with economic risks reaching Beijing's pain threshold," said Eli Lee, chief investment strategist at Bank of Singapore.

"Beyond a short-term rebound, although it is now premature at this point to assess, we cannot rule out that this could be the start of a sustainable bull market if Beijing delivers sufficiently sizeable stimulus to successfully drive a turnaround in macro fundamentals."

Sunday's developments were the latest in a slew of aggressive stimulus measures announced by Beijing last week - ranging from outsized rate cuts to fiscal support - in an attempt to shore up its ailing economy.

That lit a fire under beaten-down Chinese equities that had been languishing near multi-year lows earlier this month, as investors fretted over China's growth prospects.

Particularly in a boost for stocks, the People's Bank of China's (PBOC) also introduced two fresh tools to boost the capital market, one of which includes a swap programme allowing funds, insurers and brokers easier access to funding in order to buy stocks.

The CSI300 index soared nearly 16% last week in the wake of the announcements and the broader Shanghai composite jumped nearly 13%, both scoring their biggest weekly gains since November 2008. The Hang Seng Index also delivered its biggest weekly rise since 1998, and fifth largest in the last half-century. (This story has been corrected to remove 'Hong Kong' in paragraph 2)

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