Investors eager to see substantial fiscal support for the economy are holding onto hopes that the recent bull run for Chinese stocks is sustainable after the finance ministry hinted at greater government borrowing.
To keep alive the bull run in mainland and Hong Kong stocks that added as much as US$4.4 trillion in market value over the past three weeks, Beijing would need to roll out a fiscal stimulus equal to 3 per cent of China’s gross domestic product to revive growth and boost consumption, according to Nomura Holdings. That would amount to more than 3 trillion yuan (US$424 billion). Swiss private bank UBP said China will issue 2 trillion yuan worth of ultra-long and special bonds.
“There is hope that the government will introduce measures significant enough to equate to percentage points of GDP, reinforcing the recent uptick in investor sentiment,” said Gary Dugan, CEO of The Global CIO Office.
Still, he said, “until the government announces initiatives that can meaningfully boost aggregate demand, the equity market may struggle to gain further traction”.
03:49
Rally cry by Xi sets economic priorities for Chinese officials, absolves them of mistakes
Rally cry by Xi sets economic priorities for Chinese officials, absolves them of mistakes
