SHANGHAI/SINGAPORE - Investors eagerly awaiting China's financial stimulus announcement today were met with a general overview of economic support measures, but few concrete details. Finance Minister Lan Foan indicated Beijing's intent to significantly increase public debt and provide assistance to consumers and the real estate sector, yet specifics on the scale of spending were not disclosed.
Huang Yan, an investment manager at Shanghai QiuYang Capital Co, expressed disappointment over the absence of a clear timeline, total amounts, and spending details for the stimulus plan. Market analysts had anticipated a program ranging from 2 trillion to 10 trillion yuan ($283 billion to $1.4 trillion). Despite last month's reports regarding China's plan to issue special sovereign bonds worth approximately 2 trillion yuan and consider injecting up to 1 trillion yuan into state banks, Lan's press conference did not confirm these figures.
Since the People's Bank of China (PBOC) launched significant stimulus measures three weeks ago, the CSI300 index has risen by 16%. However, in recent sessions, the stability of stocks has faltered amid doubts about the sufficiency of political support to revive growth. Investors had hoped the Finance Minister would reserve spending details for the National People's Congress later this month.
Fred Neumann, Chief Asia Economist at HSBC, suggested that investors may need to wait until the end of the month for concrete figures when the National People's Congress reviews and votes on proposals. Jason Bedford, a former China analyst, interpreted Lan's commitment to recapitalize major state banks as a sign of anticipated credit demand, which would require budgetary support.
The slowdown in China's economy, particularly in consumer confidence and the real estate sector, has been a consequence of efforts to reduce debt and combat corruption. Nevertheless, optimism regarding the authorities' willingness to address these issues has attracted both foreign and domestic investments into the stock market. The PBOC's 500 billion yuan swap facility has also played a role in the market's rise.
Since the announcement of stimulus measures on September 24, the Shanghai Composite Index has increased by 12%, although some sectors like real estate and tourism remain sluggish. Commodity markets have experienced volatility, with price fluctuations in iron ore, other industrial metals, and oil based on expectations of demand driven by the stimulus.
Chinese funds abroad have seen a net inflow of $13.91 billion since September 24, contributing to a total inflow of $54.34 billion so far in 2024. Exchange-traded funds (ETFs) have been the main beneficiaries, while mutual funds continue to experience net outflows.
Despite the lack of details in the stimulus announcement, Bedford remains optimistic about the potential of retail interest to sustain the stock market rally, citing several factors that could contribute to continued gains. He believes that the structural story of the Chinese economy remains compelling, despite risks associated with potential execution or communication missteps.