Chinese stocks advanced after a report saying Beijing is planning further support for the nation’s struggling economy boosted sentiment.
(Bloomberg) — Chinese stocks advanced after a report saying Beijing is planning further support for the nation’s struggling economy boosted sentiment.
The Hang Seng China Enterprises Index climbed 1.3% in its fifth day of gains, marking the longest winning streak since July.
The CSI 300 Index of mainland shares rose for the first time in three days, though gains fizzled in afternoon trading to just 0.3%.
In a fresh effort to shore up the slowing economy, Beijing is considering raising its budget deficit and mulling the issuance of additional debt for infrastructure spending, Bloomberg reported Tuesday.
If the measures materialize, they would mark a shift in the government’s stance toward broader fiscal stimulus and offer investors a major confidence boost.
Gains were notable among some property developers listed in Hong Kong.
China Evergrande Group ended 23% higher while Sino-Ocean Group Holding Ltd. advanced 11% and Country Garden Holdings Co. rose 4%.
Yet key benchmarks ending the day well below their session highs suggests investors remain wary about how long the rally will last.
“The news can help sentiment but the impact will fade, and even if it materializes, as investors will think it isn’t enough,” said Redmond Wong, a market strategist at Saxo Capital Markets in Hong Kong.
“Soon, the market will also have its eyes on the Third Plenary Session of the 20th Central Committee.”
The upcoming plenum, a gathering of top leaders to discuss major economic issues, is expected to be held toward year-end.
A leading Chinese macro hedge fund called on the government to set up a stabilization fund to buy stocks, saying that would be the only way to break a “vicious cycle” of falling share prices forcing further selling.
The WeChat article on Tuesday by Li Bei, founder of Shanghai Banxia Investment Management Center, was removed the following day.
Foreign investors have continued to sell mainland stocks following the Golden-Week break, though outflows narrowed on Wednesday.
Overseas funds left the market in droves in August and September, when signs were growing that the economic recovery is losing momentum.
More private funds have built long positions in Chinese equities in anticipation that a slump in the market is close to an end, Securities Times reported, citing fund managers.
Whether any potential stimulus will be enough to drive a sustainable rebound in equities remains in question, as the nation is still battling a number of headwinds including a long-time property crisis.
China needs a “forceful” response by officials to restore confidence in the real estate sector, the International Monetary Fund said Tuesday.
–With assistance from John Cheng.
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