Chinese Stocks Surge on Stimulus Hopes

Chinese stocks rose sharply on Tuesday following a significant shift in Beijing's approach to economic stimulus.

The benchmark Shanghai Shenzhen CSI 300 index increased by 2.5%, while the Shanghai Composite index added 1.9%. Gains were also observed in Hong Kong-listed mainland stocks, pushing the Hang Seng up over 2%.

This surge came after the Politburo, a key committee composed of 24 senior Communist Party officials, announced a transition to a "moderately loose" monetary policy. This marks a notable shift from the "prudent" approach that has been in place since 2010.

Additionally, the Politburo pledged to support both stock and property markets while actively stimulating local consumption and demand, providing a clearer signal for targeted stimulus measures.

These commitments are likely to establish the agenda for the upcoming Central Economic Work Conference, which starts on Wednesday. Analysts at Westpac expect the conference to clarify policy priorities and objectives, including the annual growth goal.

China's benchmark stock indexes have experienced an increase of 15% to 20% so far in 2024, primarily due to October’s promises of more economic support. However, the previous lack of detail on stimulus measures curtailed the October rally.

China is also expected to bolster its economic initiatives in light of potential trade challenges from the U.S. under a Trump presidency.

Moreover, the Politburo's announcements have encouraged investors to overlook recent data indicating ongoing deflationary trends in China, highlighting the urgent need for more targeted stimulus measures.

The downturn in the property market and a sharp decline in private consumption have significantly impacted the Chinese economy in recent years.