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

Investors in China are uncertain if equities will finish strong in 2021 after recent stimulus measures including reduced borrowing costs and increased liquidity led to a market rally. However, a significant decline on Oct. 9 raised questions about future government support. Experts anticipate more volatility and a focus on consumer confidence.

Chinese equities soared due to policy changes and a sentiment shift rally but are reliant on the government delivering tangible fiscal stimulus. Experts believe consumers need more support to stimulate spending as property prices have dropped significantly, impacting consumer balance sheets and confidence in the market’s sustainability.

To prevent China from experiencing deflation similar to Japan, fiscal stimulus needs to restore consumer confidence. Experts emphasize the importance of boosting consumer spending through various support programs and significant expansion of existing initiatives. It remains unclear what specific steps the government will take to enhance growth.

Some stocks that saw growth during the recent rally were Chinese digital broker Futu Holdings, beer and dairy companies, and obscure names like JingSheng Mechanical and Sino Wealth. These companies benefited from increased trading volumes, market turnover, and a market-wide rally in the risk-on environment.



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