- The Hang Seng China Enterprises Index jumped 7.1%, driven by stimulus-fueled optimism.
- Property developers surged by 47%, while brokerage shares rose 35%.
- China’s recent stimulus measures include interest-rate cuts and easing home-buying restrictions.
Chinese stocks listed in Hong Kong rallied sharply, with the Hang Seng China Enterprises Index soaring 7.1%, marking its best performance in nearly two years.
Stimulus measures introduced by Chinese authorities, including interest-rate cuts and easing restrictions on home-buying, have sparked a wave of optimism among investors.
Stimulus Bets Drive Chinese Stocks to Record Gains in Hong Kong
Despite the rally, caution remains as previous upticks in Chinese markets have not always been sustained. However, low stock valuations—trading at about half the price-to-earnings ratio of the S&P 500—have attracted investors. Brokerages, in particular, benefitted from renewed confidence, with shares of companies like China Merchants Securities rising 81% in a single day.
The Chinese government’s stimulus package includes interest-rate cuts and measures to boost liquidity for banks, alongside efforts to ease restrictions on home-buying in four major cities. These initiatives aim to stabilize the housing market, which has faced significant turmoil over recent years. The bullish sentiment suggests the possibility of a recovery in the world’s second-largest economy, which had been hindered by a lingering property crisis and slow economic growth.
While these gains are encouraging, the market has seen false dawns before, including a brief rally earlier in 2024. Nevertheless, the relatively low valuations of Chinese stocks, currently trading at about half the multiple of the S&P 500, provide an enticing opportunity for investors. The Hang Seng China Enterprises Index is now one of the top performers among global equity benchmarks, rising 30% over the past month.
Chinese brokerages, often seen as a proxy for market risk sentiment, have been among the top beneficiaries of this rally. Shares of China Merchants Securities surged by 81%, while Guolian Securities jumped nearly 40%. These moves suggest a growing appetite for risk in the market as stimulus measures are expected to sustain economic activity over the coming months.
The sharp rise in Chinese stocks is a sign of renewed optimism, fueled by a comprehensive government stimulus package. While previous rallies have been short-lived, this time, attractive valuations and ongoing measures might sustain market momentum.
“I think the bull market can last three months to half a year,” said Bo Pei, an equity research analyst at US Tiger Securities Inc.
