Chinese investors are seeking more policy guidance from China’s leading economic planning body as mainland markets resume following a week-long holiday. A group of senior officials from the National Development and Reform Commission (NDRC), including Chairman Zheng Shanjie, are scheduled to brief reporters on Tuesday at 10 a.m. local time regarding the implementation of stimulus policies, according to a State Council notice.
Economists and traders are keenly observing for additional policy measures as Beijing has indicated an urgent need to realign the economy to achieve its annual growth target of approximately 5%. Prior to the holiday, authorities introduced various stimulus initiatives, including interest rate cuts, reduced cash reserve requirements for banks, relaxed property purchase regulations, and liquidity support for stock markets.
These measures have led to a substantial rise in Chinese major indexes, with a surge of over 25% as investors responded favorably to the stimulus package. Before the markets closed for the holiday, China’s CSI 300 blue-chip index continued a nine-day escalation, increasing by more than 8% on Monday. Meanwhile, Hong Kong stocks reopened last Wednesday, trading above 23,000 on Monday for the first time since 2022.
Futures contracts linked to the MSCI China A50 Connect Index, which tracks transactions of 50 leading stocks in the A-share market, have risen nearly 15% since September 30, reaching 2,536.6 by 2:30 p.m. on Monday. Similarly, SGX FTSE China A50 Index futures experienced a 12.7% increase, reaching 15,672 during the same holiday period.
Following Beijing’s commitment to increase fiscal spending on September 26, the market is anticipating further details, as noted by Erica Tay, director of macro research at Maybank Investment Banking Group. The NDRC’s clarification of policy specifics is considered crucial. Although the Ministry of Finance will not be participating in Tuesday’s briefing and has not announced significant growth-boosting policies, there have been reports hinting at such plans. Shaun Rein, managing director of China Market Research Group, emphasized the importance of fiscal stimulus in maintaining the rally’s momentum and highlighted the need for measures targeting the real economy.
Lynn Song, chief economist of Greater China at ING, suggested that optimism may persist in the short term as policymakers might leverage the positive momentum post-holiday, conditional on the effective implementation of pre-announced policies and introduction of new support measures to bolster consumer confidence and economic activity. However, Song warned that the optimism could wane if these expectations are not met. A-shares, stocks listed on Shanghai or Shenzhen exchanges, are nearing the upper end of a “relatively reasonable band” and trading above historical valuation levels, suggesting limited room for continued rallying without real economic improvements, according to Gary Ng, senior economist at Natixis.
Expectations are high for the NDRC to announce substantial fiscal policies focusing on real estate and consumption. Yet, some experts, like Hong Hao, chief economist at GROW, anticipate that the Tuesday briefing might disappoint expectations, potentially leading markets to initially open higher but close lower. Eugene Hsiao, head of China equity strategy at Macquarie Capital, emphasized the need for effective mechanisms to enhance wages, consumption, and consumer confidence.
Morgan Stanley economists predict a 2-trillion-yuan fiscal package to support local government finances, bank recapitalization, and consumption enhancement. UBS projects a more modest fiscal package, estimating a range of 1.5 trillion to 2 trillion yuan for the current year, followed by 2 trillion to 3 trillion yuan in 2025. A significant market upside remains possible if Beijing advances with the expected fiscal support, with Citibank projecting the Hang Seng Index in Hong Kong could reach 26,000 by June 2025, following a potential 3-trillion-yuan consumption support package.
