China stocks rally as stimulus bets aid sentiment

BEIJING: Chinese stocks advance after a report saying Beijing is planning further support for the nation’s struggling economy boosted sentiment. Investors remain wary about how long the rally will last.

The Hang Seng China Enterprises Index rose as much as 2.1%, as tech shares including Meituan and Alibaba Group Holding Ltd surged.

The onshore benchmark CSI 300 Index climbed as much as 0.9%, halting a two-day losing streak.

In a fresh effort to shore up the slowing economy, Beijing is considering raising its budget deficit for 2023, Bloomberg reported on Tuesday.

Policymakers are weighing the issuance of at least one trillion yuan (US$137bil) of additional sovereign debt for spending on infrastructure such as water conservancy projects, according to people familiar with the matter.

If the measures materialise, they would mark a shift in the government’s stance as it has so far avoided broader financial stimulus and would offer investors a major confidence boost as they’ve been concerned about how far China is willing to go to support growth.

Investors had sold mainland stocks after the Golden Week break following disappointing holiday consumption data.

In a sign of improving sentiment, overseas investors have bought net 3.8 billion yuan of onshore stocks through trading links with Hong Kong so far yesterday.

They had been net sellers for most of the past three months, including record withdrawals in August.

Whether the optimism over potential stimulus is enough to drive a sustainable rebound in equities remains in question, as the nation is still battling a number of headwinds, including a long-time property crisis.

China needs a “forceful” response by officials to restore confidence in its strugglling real estate sector, the International Monetary Fund said on Tuesday.

“The news can help sentiment, but the impact will fade, even if it materialises, as investors will think it isn’t enough,” said Redmond Wong, a market strategist at Saxo Capital Markets in Hong Kong.

“Soon, the market will also have its eyes on the Third Plenary Session of the 20th Central Committee.”

The upcoming plenum, a gathering of top leaders to discuss major economic issues, is expected to be held towards the end of the year.

More private funds have built long positions in Chinese equities in anticipation that a slump in the market is close to an end, Securities Times reported, citing fund managers. — Bloomberg