China Stock Rally Picks Up as Beijing Walks the Talk on Policy

(Bloomberg) — Chinese stocks extended their gains from last week as Beijing backed up its pledge to shore up the economy by announcing more measures to boost consumption and support the ailing property sector.

Most Read from Bloomberg

The Hang Seng China Enterprises Index, which tracks the nation’s stocks listed in Hong Kong, jumped as much as 3.2%, adding to its 6.1% surge from last week. The CSI 300 Index climbed up to 1.8% before paring some gains. Both measures were headed for their biggest monthly advance since January. A Bloomberg Intelligence gauge of real estate shares was set to enter a bull market.

Sentiment toward China’s markets is improving fast as regulators introduce incremental steps, following through on the promises made at last week’s Politburo meeting. Authorities announced new measures to support consumption on Monday, while a separate report said big cities such as Beijing and Shenzhen may ease restrictions on the property sector. Overseas funds were set to be net buyers of onshore Chinese stocks for a fifth straight session.

“The government’s stance has clearly turned more supportive,” said Vey-Sern Ling, managing director at Union Bancaire Privee. There is more confidence that China will back up stimulus talk with concrete measures, he added.

Beijing’s actions over the past few days are raising hopes among investors, who have been burned repeatedly in the past as policy promises lacked implementation. China should provide easier access for mid- to long-term funds to invest in its stock market as “stabilizers” and guide household savings to the market as part of its capital market reform, China Securities Journal said in a front-page commentary Monday.

Story continues

Some better-than-expected earnings reports, including those from restaurant operator Haidilao International Holding Ltd. and battery maker Contemporary Amperex Technology Co., have added to the positive sentiment.

To-be-sure, China’s economic recovery remains a concern and investors would be keen to see the impact of the latest measures. Economic activity lost more steam in July with manufacturing contracting again and the services sector weakening, data showed on Monday.

The recent optimism has revived inflows into Chinese stocks, at least for now. Overseas funds were net buyers of 8.7 billion yuan ($1.2 billion) of onshore equities so far in the session via trading links with Hong Kong. They bought a net 16.4 billion yuan on Friday, taking purchases last week to the largest since January.

“Policy tone turning more positive” has lately helped investors’ confidence, Jefferies Financial Group Inc. analysts including Calvin Leung and Shujin Chen wrote in a note dated July 30, adding that they are “positive” on the market and the property sector for three-to-six months.

–With assistance from Abhishek Vishnoi.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.