Chinese Stocks Surge Amid Stimulus Measures

SHANGHAI/SINGAPORE (Reuters) – Chinese stocks experienced their biggest single-day gains in 16 years on Monday, with domestic A-shares achieving record turnover as investors flocked to participate in a remarkable rally initiated by Beijing’s latest stimulus measures.

The CSI300 blue-chip index has risen nearly 30% since its February low, suggesting a bull market by some definitions. Much of this increase has occurred rapidly over the past few sessions since last week.

Traders, anxious about missing the rally before a week-long holiday commencing Tuesday, contributed to the CSI300 index’s 8.5% closing surge, resulting in a five-day gain of over 25%—the strongest on record.

Meanwhile, the broader Shanghai Composite Index saw total turnover reaching 1.17 trillion yuan ($166.84 billion) with an 8.1% rise. Its five-day gains since last Tuesday, when Beijing rolled out stimulus measures to counteract a economic slowdown, reached 21.4%, the highest since 1996.

This was the best single-day percentage gain for both the CSI and SSEC indexes since 2008. Additionally, the smaller Shenzhen index soared 11%, with a turnover of 1.4 trillion yuan.

The recent stock rally followed last week’s most aggressive stimulus measures since the pandemic, which included significant rate cuts and fiscal support to bolster the struggling economy.

A notable boost came from the People’s Bank of China (PBOC), which introduced two new tools for enhancing market liquidity, including a swap program providing easier access to funding for buying stocks.

“This is a major turnaround,” stated Dickie Wong, executive director of research at Kingston Securities. “The policies are unprecedented, aiming to stabilize housing prices and support the stock market.”

Concerns among foreign investors about missing opportunities led to increased activity, while local retail investors sought advice, driving significant inflows that pushed the Hang Seng Index up to 21,000.

Hong Kong’s Hang Seng Index advanced 2.4% on Monday and is now up about 24% year-to-date, overtaking Taiwan as Asia’s best-performing stock market.

Additional momentum came from China’s central bank, which announced plans for banks to reduce mortgage rates for existing home loans before October 31, as part of broad efforts to assist the faltering property market.

Guangzhou has lifted all restrictions on home purchases, while Shanghai and Shenzhen have eased buying restrictions, which significantly boosted property shares on Monday. Mainland-listed property stocks rose 8.2%, and the Hang Seng Mainland Properties Index increased by 6.4%.

Investor optimism regarding potential revivals in domestic consumption also lifted consumer staples, which surged 8.8%, marking its highest daily percentage gain in 16 years.

For September, the CSI300 index reflected a 21% gain, its best since December 2014, while the Shanghai Composite Index ended the month up 17%, marking its strongest performance since April 2015.

The Hang Seng Index achieved its best month since November 2022, rising 17% after a record weekly increase since 1998, and the fifth largest in the past 50 years.

Mainland financial markets will be closed from October 1 to 7 for the National Day holidays.

($1 = 7.0128 Chinese yuan renminbi)