China, Hong Kong shares rally after top leaders vows more support for economy

HONG KONG – Chinese and Hong Kong stocks surged on Tuesday after leaders in Beijing pledged fresh measures to boost the nation’s stuttering economy.

The onshore renminbi gained as much as 0.6 per cent, while the dollar bonds of Chinese builders also rallied.

With data in recent months showing growth stuttering and business activity slowing, Beijing has come under pressure to provide much-needed support, particularly for the vast property sector.

Despite a series of announcements and minor interest rate cuts, investors have been largely disappointed by the policy response from the authorities, with very few concrete measures being unveiled.

However, top leaders on Monday signalled a fresh push to get the post-Covid-19 recovery back on track, particularly the troubled property sector, which accounts for a major part of the world’s No. 2 economy.

After a meeting, the 24-person Politburo recognised “the current economic operation is facing new difficulties and challenges” and agreed they must “implement precise and effective macroeconomic regulation, strengthen counter-cyclical regulation and policy reserves”.

The meeting, headed by President Xi Jinping, also called for efforts to expand domestic consumption and “adjust and optimise real estate policies in a timely manner”, according to state broadcaster CCTV.

“The overall stance remains in a pro-growth mindset, but the focus is more forward-looking with an increased emphasis on addressing structural challenges (that is, local government debt) to facilitate longer-term sustainable growth,” said HSBC Greater China economist Erin Xin.

The announcement “keeps a supportive tone, which can help provide some support for the recovery and it may provide some boost to market sentiment”, she added.

While it was nowhere near the blockbuster spending plans seen in the past, the news gave investors a boost, with Hong Kong jumping more than 3 per cent thanks to a rally in real estate companies and tech giants.

“Investors now believe the Politburo meeting sets an encouraging tone for more substantial and comprehensive policy easing down the road,” said SPI Asset Management managing partner Stephen Innes.

“Why is it different this time? Because the lawmakers acknowledged the problem. And to fix any problem, you must acknowledge there is a problem.”

However, lead Asia macro strategist at Societe Generale Kiyong Seong added: “Overall, the Politburo fell short of so-called ‘bazooka stimulus’.

“I don’t expect a sustained impact on the market unless there is a series of strong concrete steps.”