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Divided Chinese markets: exploits by Shanghai and Shenzhen, while Hong Kong records a thud. The stock markets of mainland China are soaring at the start, having returned to trading after the long holiday break of the Golden Week: the Shanghai Composite index, in the wake of expectations of new measures to support growth, jumps by 10.13%, to 3674, 40 points, while that of Shenzhen marks an increase of 12.92%, to 2,176.47.
Yesterday the Chinese media anticipated that local brokers were preparing for a “frantic” reopening of the Dragon’s stock markets, after the long Golden Week holiday break. The state network CCTV, for example, had reported the record number of account openings at the main brokerage firms in recent days, with very strong customer demand in online and offline channels.
The surge in activity was linked to the stock rally which in almost two weeks, in the wake of the monetary, financial and fiscal stimulus measures launched or announced to relaunch the economy, had allowed the stock prices to gain over 20%. Expectations have increased in view of the upcoming press conference which will see Zheng Shanjie, head of the National Development and Reform Commission (NDRC), the most powerful economic planner in the country, illustrate the launch of «a package of incremental policies for solidly promote economic growth”. Beijing is struggling to sustain growth when Beijing’s 2024 target of a GDP of “around 5%” is at risk, according to many analysts, due to the deep real estate crisis, the risk of deflation, weak consumption and Youth unemployment skyrocketed to 18.8% in August. The hopes of the expected bazooka have ignited the markets: however, there is also the part of the reforms of the economic system to alleviate the debt crisis in the real estate sector and to increase domestic demand, steps considered necessary if Beijing wants to resolve the fundamental obstacles to growth.
Hong Kong takes a dive in the early stages in the wake of losses on Wall Street and profit-taking triggered after the solid increases accumulated by expectations of the measures adopted or announced by Beijing to revive the growth of the Chinese economy: the Hang Seng index falls 4.18%, slipping to 22,134.78 points.
Tokyo starts the session with a minus sign, in the wake of the correction of US stock indices, in the face of geopolitical tensions in the Middle East and the rise in oil prices, above 80 dollars a barrel. At the opening, the Nikkei reference index lost 0.76%, to 39,034.68, with a loss of 298 points. On the exchange rate front, the yen depreciated against the dollar at 147.90, while it was stable at 162.40 against the euro.
Analysis: Divided Chinese Markets, A Fluctuating Path to Growth
As the Chinese markets reopened after the long Golden Week holiday break, a surge in activity was observed, with the Shanghai Composite index jumping by 10.13% to 3674.40 points and the Shenzhen index marking an increase of 12.92% to 2,176.47 [[1]]. This market rally was largely driven by expectations of new measures to support growth, which had been building up in the wake of the monetary, financial, and fiscal stimulus measures launched or announced to relaunch the economy [[2]].
The surge in activity was linked to the record number of account openings at the main brokerage firms in recent days, with very strong customer demand in online and offline channels [[3]]. This increase in activity is a reflection of the market’s optimism about the government’s efforts to stimulate the economy. The press conference held by Zheng Shanjie, head of the National Development and Reform Commission (NDRC), was highly anticipated, as it was expected to reveal a package of incremental policies to promote economic growth.
However, considering the current news, as I read it seems that stimulus news from China has disappointed some stock rallies [[2]]. Despite the enthusiasm and anticipation around this rally, it remains to be seen whether the momentum will continue in the coming days and weeks. The fluctuations in the Chinese markets reflect the volatile nature of the economy, and the constant see-saw between optimism and skepticism among investors.
It is also noteworthy that the Hong Kong markets failed to follow suit with the mainland markets and recorded a decline instead. This divided response among Chinese markets highlights the differences in investor sentiment and market dynamics between the two regions.
while the recent market rally in mainland China is a promising development, it remains to be seen whether this will translate into sustained growth and stability. With the ongoing fluctuations and uncertainty surrounding the Chinese economy, investors will be keeping a close eye on future developments and their impact on the markets.
References:
- [[1]]
– [[2]]
– [[3]]
