Mainland China’s stock markets are anticipated to continue their upward trajectory after a week-long hiatus of its National holiday, bolstered by recent government economic support measures.
Last Monday witnessed an impressive 8% surge in China’s CSI 300 blue-chip index, marking its strongest performance in over sixteen years, and capping a nine-day streak which overall pushed the index up by more than 25%.
In contrast, Hong Kong’s market faltered, ending a six-day winning streak on Thursday. This raised concerns about the potential short-lived nature of the rally prompted by Beijing’s stimulus. However, Eugene Hsiao, Head of China Equity Strategy at Macquarie Capital, interpreted Hong Kong’s drop as a temporary retreat driven by investors cashing in on the gains from the previous day.
Hsiao, along with other market strategists, remain optimistic about the potential for sustained gains in mainland stocks. He attributed the positive outlook to the combination of Beijing’s aggressive fiscal measures and increased retail investor activity, suggesting these factors could keep the rally alive well into the year’s end.
Shehzad Qazi, Chief Operating Officer at China Beige Book International, concurred, while also cautioning about possible negative shifts in sentiment as we approach 2025. Qazi pointed out that while the stimulus is expected to significantly boost economic growth in the short term, its inability to address deeper structural issues may lead to disappointment and a potential market pullback.
Shaun Rein, founder of China Market Research, estimated a continued upward movement in Chinese equities for another one to three weeks. However, he highlighted the inevitability of market volatility driven by sentiment, as investors navigate the timing of their exits.
Overall, despite the recent pause in Hong Kong, the consensus among experts points to a robust return for China’s mainland markets, propelled by government stimulus efforts but shadowed by the underlying vulnerability due to unresolved structural challenges.
