Chinese shares skyrocketed to two-year highs on Tuesday as mainland markets reopened after a week-long holiday, fueled by speculation of additional stimulus measures from Beijing. The blue-chip CSI300 surged 10% in early trading to its highest level since mid-2022, while the rose 9.7% and reached its peak since December 2021.
China's state planner announced a $28 billion spending plan for investment projects on Tuesday and promised to accelerate fiscal support, expressing full confidence in achieving this year's economic growth targets. Prior to the Golden Week holiday, Chinese stocks had already been on an upward trend, with Beijing unveiling its most aggressive stimulus measures since the pandemic.
Expert Analysis:
Rong Ren Goh, Portfolio Manager, Eastspring Investments, Singapore
"Markets were anticipating guidance on the size of fiscal stimulus at this press conference, but with the Ministry of Finance absent, the information was not provided. The market was hoping for a stimulus between CNY 2 trillion to 10 trillion to sustain the risk rally, but no new information was revealed, disappointing investors."
Matt Simpson, Senior Market Analyst, City Index, Brisbane
"We're seeing a potential pullback in China's markets after a strong rally. Some investors are taking profits, which could lead to choppy trading. A deeper pullback may be on the horizon."
Rob Carnell, ING's Regional Head of Research for Asia-Pacific, Singapore
"Expectations are high for more stimulus measures to be announced, such as consumption vouchers and increased infrastructure spending. Positive stimulus messages have boosted sentiment, but further government action is needed to sustain the rally."
Vasu Menon, Managing Director, Investment Strategy, OCBC, Singapore
"The rally in Chinese markets is driven by sentiment and hopes of additional stimulus measures. For the rally to be sustainable, more fiscal policies and government support are necessary."
Gary Ng, Senior Economist, Natixis, Hong Kong
"Investors are cautious as uncertainty surrounds the stimulus measures. The market is rising to a comfortable level, but clarity on the government's actions is needed."
Jun Rong Yeap, Market Strategist, IG, Singapore
"Mainland China stocks are catching up after the Golden Week holiday, fueled by optimism around recent stimulus efforts. The upcoming policy press conference will be closely watched for further fiscal support."
Christopher Wong, Currency Strategist, OCBC, Singapore
"The lack of details on stimulus measures at the NDRC press conference has dampened sentiments, leading to a setback in the post-opening rally. Follow-through from the government is crucial for market confidence."
Overall, the surge in Chinese shares is driven by optimism around government stimulus measures. While the rally is impressive, sustainability will depend on continued fiscal support and clarity on the government's actions. Investors should monitor policy announcements closely to gauge the market's future trajectory and make informed investment decisions.