From Morningstar: 2024-10-10 09:03:00

Investors in Chinese equities are questioning whether the Year of the Dragon will bring both good fortune and market volatility. China’s central bank introduced stimulus measures, sparking a rally in domestic stocks. However, significant losses on Oct. 9 raised concerns. Experts predict further volatility based on future policies. Consumers are hoping for increased support to boost the economy.

Chinese market rallies ensued after policies were announced, but the narrative shift may require further tangible fiscal stimulus to combat deflation and fragile consumer sentiment. Lack of consumer confidence calls for increased financial support in areas such as property ownership. Investors are eagerly awaiting China’s policy decisions to stabilize the economic and stock market uncertainty.

Chinese investors call for more direct consumer support from government initiatives, such as expanded trade-in programs and cash handouts. Despite some current measures like consumption vouchers, investors believe more substantial aid is necessary for sustainable growth. Expectations are high for the government to release sovereign bonds and implement cash clunker schemes to encourage consumer spending.

Experts warn of China potentially following Japan’s deflationary path if confidence in the market is not restored. Calls for immediate fiscal action, prioritizing consumption, are being made to avert a similar crisis. Each decision China’s authorities make affects the potential for economic growth and investor confidence.

Top Chinese stocks to watch include Futu Holdings, which saw its share price surge during the recent rally due to high trading volumes and new account openings. Other sectors like beer and dairy companies are also benefiting from market optimism, as investors anticipate a possible consumer recovery. Despite market fluctuations, certain stocks continue to deliver strong performance.



Read more at Morningstar: Chinese Stocks Rally, Then Plunge – What Happens Next?