China’s economic stimulus measures have led to a 25% rise in the stock market. There may be more in the future | Real Time Headlines

Analysts predict that Chinese stocks will continue to rise after the mainland market reopens after the Golden Week.

from Beijing Economic support announced last week Promoting the CSI 300 blue chip index to rise by more than 25% for nine consecutive trading days. On Monday, before markets closed for a week-long holiday, the stock rose more than 8%, its best one-day gain in 16 years.

So Hong Kong stocks fall Thursday ended a six-day winning streak and raised concerns that China’s stimulus rally may be starting to fail.

Now, the question on investors’ minds is, how long will the rally last?

In China, this situation may continue for a long time after the mainland market returns to normal next Tuesday, said Eugene Hsiao, head of China equity strategy at Macquarie Capital. The decline is “short-term profit taking.”

Beijing’s recent stimulus package coupled with greater participation from retail investors could fuel a longer rally, he said.

Shehzad Qazi, chief operating officer of China Beige Book International, said the rally could even continue until the end of the year.

But Qazi said that if the market becomes disappointed with the impact of stimulus measures, it risks “a serious reversal in sentiment by 2025.” In my opinion, stimulus measures are not enough to solve China’s structural economic problems.

Qazi added that investors expect the stimulus to deliver “spectacular growth” to the economy in the coming months, and that enthusiasm would be tempered if the package delivers only a “modest boost.”

Lei Xiaoshan, founder of China Market Research Company, predicted that “China’s stock market still has room for growth in 1-3 weeks.” However, Rein said it’s not unusual for prices to fall as “investors liquidate their positions to win.” Given that the rally is largely driven by sentiment, there may be more volatility ahead because “no one wants to be the last one in, but no one wants to be the last one out either.”

Lu Ting, chief China economist at Nomura Securities, said in a report on Thursday that more individual investors are being incentivized to join the trade “for fear of missing out on what appears to be a once-in-a-lifetime rally.”

Market sentiment has also been boosted by growing hopes that Beijing will roll out more fiscal policy and other support measures to boost the economy. The Ministry of Finance has yet to launch major policies to support growth. Despite reports Such plans.

“The ultimate size and content of the fiscal package is likely to be quite provisional and uncertain,” Nomura’s Lu said in a note, adding that investors should make a “more sober assessment” amid the recent market frenzy.

Macquarie Capital’s Xiao said the stock market rally could be derailed if the central government’s fiscal stimulus package fails to live up to expectations. He said other events that could shorten the rally include “stronger-than-expected U.S. jobs data suggesting a smaller rate cut by the Fed, or a Trump victory in November.”

China has been battling looming deflationary pressures due to a prolonged slump in real estate and weakening domestic consumer confidence. A series of economic data in recent months Failure to meet expectations raises concerns Economists believe that the world’s second-largest economy may not be able to achieve its full-year growth target of 5%.

Last week, the People’s Bank of China reduced the amount of cash banks must hold, known as “cash reserves.” Deposit Reserve Rate or RRRhalf a percentage point. The central bank also Lower the benchmark interest rate The 7-day reverse repurchase rate was raised by 20 basis points to 1.5%.

Global X investment strategist Billy Leung said the key focus will be on the effectiveness of further stimulus measures.

In the CNBC program “Asian road sign,” Alexander Coosley, Asia Pacific investment strategist at Russell Investments, pointed out that some policies are slightly lacking – “We have not yet entered a world where finance is the dominant driver, so that is what we are really looking for,” he explain.

“The thing that I do worry about, and I think Russell is most worried about, is that we’re still in a period where the Chinese authorities are reacting to the weak data and things are starting to improve, but we don’t see actual follow-through,” Coosley said. .