(Bloomberg) -- Chinese stocks extended their gains on Wednesday as investors continued to bet that Beijing’s latest stimulus measures would help drive a market turnaround and kickstart the country’s sluggish economy.
The onshore benchmark CSI 300 Index was up 2.1% as of the mid-day trading break, close to recovering all of its losses for 2024. The Hang Seng China Enterprises Index rose more than 2% following a 5.1% gain in the previous session.
The bounce shows investors are welcoming the comprehensiveness of the stimulus package unveiled Tuesday, which included liquidity support for the stock market and a policy rate cut. The policy blitz also fanned hopes that the government — with the Politburo set to meet ahead of a weeklong annual holiday starting Oct. 1 — may be readying ammunition to address other deep-rooted issues, such as weak consumer confidence.
The People’s Bank of China on Tuesday said it will set up a swap facility to allow securities firms, funds and insurance companies to tap its funds to purchase equities. The central bank is also weighing plans for a stock stabilization fund. The securities regulator later issued draft guidelines urging listed companies to boost investment returns.
“We believe these coordinated policy announcements could pave the way for further policy support and raise the possibility of an economic upcycle in 2025,” Chaoping Zhu, global market strategist at JP Morgan Asset Management, wrote in a note. “Combined with private sector companies that have improved their profit margin and corporate fundamentals, we do see value opportunities in Chinese equities, and diversification opportunities given the expensive markets around the world.”
The Hang Seng Tech Index, a measure of the 30 largest tech companies listed in Hong Kong, jumped as much as 3.8%, taking its gains from an August low to more than 20%. A Bloomberg Intelligence gauge of developer shares has rallied about 20% in just two weeks.
Still, some market watchers are sounding caution, warning the gains may be fleeting if Beijing fails to address its long-standing problems. Chinese equities have been trapped in a start-stop cycle of gains and losses for most of this year as the government’s piecemeal approach to reviving the market produced only brief rallies. Key benchmarks have come off session-highs on Wednesday.
--With assistance from Charlotte Yang.
(Updates with additional details from sixth paragraph.)
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