Stocks had their best week since 2008 after the country unveiled an economic stimulus package that included a $114 billion pool of cash.
The CSI 300 index has risen nearly 15% so far this week, its best performance since November 2008, when my country announced a similar stimulus package.
The stock market has rebounded as a number of policies have strongly supported the capital market, promoted the orderly development of real estate, and boosted domestic consumption.
On Tuesday, the People’s Bank of China announced an 800 billion yuan ($114 billion) pool of funds to provide loans to companies to buy back their own shares, and to provide funds to non-bank financial institutions such as insurance companies to buy stocks.
On Friday, the CSI 300 rose 4.47%, while Hong Kong's Hang Seng rose 3.55%, up more than 12% since the beginning of the week, the biggest weekly gain since hitting an all-time high in August 2007.
“We are now at a critical juncture for the Chinese economy and its stock market,” said Nicholas Yeo, head of Chinese equities at Abrdn, who said in a note that the Federal Reserve’s recent rate cuts would also be a significant tailwind.
"Loose global conditions are expected to strengthen consumption, which is a big boon for China, the world's largest exporter," he said.
Hopes for more stimulus from China also boosted European stocks. The pan-European Stoxx 600 index closed at a record high on Thursday, with luxury goods groups benefiting from stronger spending by Chinese consumers.
The rebound in Chinese stocks followed gains on Wall Street, with the S&P 500 notching its third record closing high of the week on Thursday and stocks climbing ahead of Friday's inflation report.
Citigroup said the past three days were the busiest for its equity sales and trading teams in Asia, with record client flows into Chinese stocks in Hong Kong and mainland China.
Due to the frenzy of trading on Friday morning, the exchange issued a notice saying the trading speed was "abnormal."
“We can’t view this as a policy of the same old,” said Winnie Wu, equity strategist at Bank of America. “This is the first time that the Chinese government has encouraged leveraged investment in the stock market. There is still a lot of room for upside in the liquidity leverage-driven rally.”
David Chao, global market strategist at Invesco, said the rebound in Chinese stocks could continue. “The Chinese market is about momentum, and I see certain similarities between the current rebound and the 2014-15 rebound,” when the Shanghai Composite Index rose about 150% between June 2014 and June 2015.
Chao added that as the dollar continues to weaken due to the Federal Reserve's rate cuts, he expects "funds may rotate out of expensive and crowded global technology stocks and into cheaper emerging market assets."
The article is forwarded from: Jinshi Data
