Chinese Stocks Undergo a Good Test
2024-10-10
Summary:
Chinese stocks steadied Thursday after a sell-off, with analysts noting future momentum will depend more on fiscal policy than on monetary support.
Chinese stocks steadied on Thursday after heavy sell-off. Analysts say positive momentum will likely hinge on the magnitude and execution of more fiscal policy, rather than just monetary support.
In the latest trading session, the A50 index experienced a significant decline, while the Hang Seng index erased all the gains it made during the National Day holiday. The sudden downturn has sparked concerns among investors, with some speculating that this could be another false dawn for the market recovery.
Moreover, the holiday season saw local tourists spending less than they did before the COVID-19 pandemic, indicating that consumer sentiment remains subdued. While there have been slight signs of economic stabilization, the muted spending patterns suggest that a full recovery in domestic consumption may still be some way off.
Leveraged equity positions in China surged at the fastest pace in more than a decade as traders boosted risky wagers upon on a rally that could parallel that in 2008 and in 2015.
Retail investors are hungry for more gains. A gauge tracking transfers from savings accounts into stock accounts by the ICBC more than tripled on Tuesday from 30 Sept levels, media reports show.
The pullback provides a more attractive entry point for those who missed that initial whoosh. Today may be a good test for Chinese markets, while demand for US assets from Asia remains strong.
The A50 index rebounded off the support around 13,200, cementing the case for more gains. But a push above 14,600 may be needed to convince more bulls to pour money in.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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