Mainland China stocks surged another 4% on 30th September, culminating in a 16% rise in the last five days. The stock market frenzy kicked in after the People’s Bank of China (PBOC) announced new policy easing measures that unlocked more than $140 billion in liquidity.
The Chinese stock market has surged an outstanding 16% in the last five days after undergoing another sharp 4% rise. The country’s stocks recorded their largest single-day gains in 16 years. Domestic A-shares led the pack with the highest-ever turnover amid the policy-driven investor frenzy.
Policy changes boost investor confidence in the Chinese stock market
The Chinese stock markets promptly reacted to the new policy changes the People’s Bank of China (PBOC) announced. These policies are the most aggressive stimulus proposed in China since the 2020 pandemic. The PBOC governor, Pan Gongsheng, issued a rare statement announcing several policy changes to boost investor confidence.
The PBOC’s policy review announcement detailed that the central bank will cut the reserve requirement ratio for banking institutions by 50 basis points. The central bank’s governor also announced that the seven-day reverse purchase rate will be reduced from 1.7% to 1.5%.
Pan Gongsheng stated that the loan prime rate will reduce by 0.2 to 0.25 percentage points. However, he did not mention when the seven-day reverse purchase rate change will be implemented. He also failed to mention if the loan prime rate under revision is the one-year or five-year loan prime rate. The five-year LPR is at 3.85%, while the one-year LPR currently stands at 3.35%.
Other policy changes followed, adding fuel to the growing movement. On Sunday, China’s central bank announced a reduction in mortgage rates for existing home loans. The policy will be implemented before October 31st.
China’s Guangzhou city lifts restrictions on home purchases
According to a local Chinese news outlet, Guangzhou city also announced the same day the lifting of all restrictions on home purchases, while Shanghai and Shenzhen loosened curbs on purchases. The reforms propelled shares of property companies on Monday.
Mainland-listed property stocks advanced 8.2%, while the Hang Seng Mainland Properties Index charged 6.4% higher. Long-term funds worth 1 trillion yuan also freed approximately $142 billion in liquidity, and some of these funds could find their way into the Chinese stock market.
BREAKING: China's stock market is up another 4% today for a total gain of 16% over the last 5 days after economic stimulus was announced.
It feels like 2020 all over again. pic.twitter.com/S93I5DWwOG
— The Kobeissi Letter (@KobeissiLetter) September 30, 2024
Mainland China’s CSI 300 recorded an outstanding performance in the last four years on September 24th, surging 4.33% and closing at 3351.9. The index has recorded nearly 30% gains from lows recorded in February. Much of the gains have happened recently, in just a few market sessions since last week. Today, the index is up 4%, according to Kobeissi Letter’s post dated September 30th.
The Hong Kong Hang Seng Index is up 2.4% on Monday, 15.82% in the last 5 days, and 17.48% in the previous month. Since the year began, the index has rallied by roughly 24%, outperforming Taiwan to become Asia’s best-performing stock market.