Hopes of Fiscal Stimulus and Earnings Growth Keep China Market Indexes Elevated

Li Chen
23 Oct, 2024
Hong Kong

Stocks in China and Hong Kong advanced for the second day in a row amid continued hopes of large fiscal stimulus measures to revive consumer confidence and support the flailing property market. 

The Hang Seng index jumped 1.7% and the CSI 300 index advanced 1%, as positive earnings supported market enthusiasm. 

Market indexes have traded volatile in the last two weeks after politicians failed to follow through on promises of large fiscal stimulus following a raft of monetary stimulus measures from the People's Bank of China. 

The Hang Seng index has soared 24%, and the CSI 300 index has advanced 18% in the year so far as of the close of trading on Wednesday. 

Domestic and international investor frenzy pushed market indexes to highs not seen in the last eighteen months, as investors believed that the central government was finally ready to provide necessary support to revive the ailing property market. 

However, those measures will require the central government to assume additional debt and channel funding to local governments to finance residential construction, which also raises the prospects of wasteful spending. 

The legislative committee of the National People's Congress is likely to approve the debt increase between 2 trillion yuan and 4 trillion yuan and the issuance of new sovereign bonds at its next meeting over the next two weeks. 

China has increasingly relied on excessive government spending to meet its high economic growth target with weak returns, which also leads to large-scale corruption and wateful infrastructure projects that are not needed for the local economy. 

Despite Beijing's leadership's efforts to prop the economy, China's economic growth is estimated to slow down to below 3% over the next three years, which will put additional pressure on the central government to increase debt-funded spending. 

On the earnings front, 22 companies are slated to release their quarterly results over the next two weeks, and investors are hoping that earnings growth will surpass market expectations. 

 

China Stock Movers 

The Hang Seng index jumped 1.7% to 20,852.12, and the mainland China-focused CSI 300 index advanced 1.0% to 3,995.81. 

China Resources Beverage advanced 14% to HK $16.50 after the soft drink maker sold 347 million shares in a global offering priced at HK$14.50 per share. 

The soft drink maker raised HK$4.9 billion, and the company's Hong Kong tranche, covering 40% of the offering, was over subscribed by 234.5 times and the international tranche by 24.5 times.    

China Unicom increased 3.5% to HK $7.09 after the telecom carrier said third quarter earnings rose 7.9% from a year ago. 

Chow Tai Fook Jewellery Group jumped 9% to HK $7.92 after comments from Morgan Stanley suggested same-store sales decline in the current month narrowed. 

Alibaba Group increased 0.7% to HK $97.90, JD.com advanced 3.1% to HK $159.10, Tencent Holdings added 2% to HK $430.20, and Baidu rose 0.7% to HK $88.95. 

BYD gained 2.2% to HK $290.80, Li Auto added 7.5% to HK $108.60, and Xiaomi Corp. added 5.1% to HK $25.70.