China returned to the business of exerting influence over global markets this week, announcing a significant round of stimulus actions. The move was backed by pledges for further support and just ahead of the Shanghai Stock Exchange's weeklong shutdown due to begin on Tuesday. China stocks led U.S. markets in early trade.
China's regulators on Friday began formally implementing some actions announced early in the week, sending Shanghai and Hong Kong markets sharply higher. Hong Kong's Hang Seng Index rallied 3.6%, leaving it with a 13% gain for the week. That gave it its highest close since April 2023 and its best weekly gain since late 1998, according to the South China Morning Post. The index has a year-to-date gain of 21%.
The Shanghai Composite surged 2.9%, giving it a 12.8% weekly advance. The Shanghai Composite ended at its highest level since early June, up 4.5% for the year.
The Shanghai Stock Exchange will close from Oct. 1 through Oct. 7 for the National Day holiday. The Hong Kong Stock Exchange will close only on Oct. 7. One of the country's most important holidays, the National Day break typically generates high levels of travel and consumption.
China stocks rallying early on U.S. markets included JD.com, PDD Holding and Travel.com.
China Regulators Step Up Economic Support
Beijing unveiled on Tuesday new monetary and property-market stimulus measures to give its anemic economy a jolt. Among monetary measures announced by the People's Bank of China is a 50-basis-point cut in the reserve ratio that determines how much cash banks need to keep on hand. That move should free up $142 billion in liquidity, China's central bank said. A further cut of a quarter-point or half-point could come in the fourth quarter.
Beijing also said it would cut existing mortgage rates by about a half-percentage point. That stands to save Chinese households $21 billion per year in mortgage payments, People's Bank Governor Pan Gongsheng said. Further, the down payment requirement for second homes will be cut to 15% from 25%.
On Thursday, markets rallied further as China announced additional measures. Those included unspecified "living allowances," cash handouts to the poor ahead of Oct. 1, which marks the 75th anniversary of Communist rule.
Additionally, Shanghai's government plans to give out 500 million yuan in consumption vouchers for dining, accommodation, cinema and sporting events, according to the Xinhua news service.
Beijing also reportedly plans to recapitalize six big state banks with about $1 trillion in yuan, or $142 billion.
China's economy has struggled through a painfully slow recovery following the coronavirus pandemic. The country was much more aggressive in its Covid-era restrictions, and much more cautious in easing those restrictions as infections declined.
The result has been complicated. Domestic demand declined sharply. Meanwhile, the country's factories, mines and other producers generated mounding surpluses. Attempts to export those surpluses at reduced prices have many stronger economies raising tariffs and other barriers, in order to prevent China from "exporting its deflation," which has recently become a common term in political parlance.
Even before the pandemic, China's state-backed production of steel and solar panels threatened to flood and undercut global markets. Since the pandemic, EV automakers — most notably BYDBYDDF — have started exporting their autos to Europe and other global markets.
Meanwhile, lagging demand from China's powerhouse economy has helped depress prices for a broad range of commodities, including oil, iron ore and copper.
China Stocks Lead U.S. Market
On U.S. markets. China-based PDD Holding led the Nasdaq in morning trade, rallying 6.6%. Online retailer JD.com also ran high in the index with a 3.6% gain. Las Vegas Sands and Wynn Resorts ran near the head of the S&P 500, rising on the recent strength in Macau gaming district revenue. LVS was up 4.4%. WYNN climbed 5.1%.
China-based travel information site Travel.com rallied nearly 6%. The stock showed a 16.5% gain for the week through Thursday. Electric vehicle manufacturers Xpeng and Nio also hustled higher, up 5.8% and 8%, respectively. BYD advanced 3.5%.
