Hong Kong stocks leap by most in 18 months after China unveils stimulus package

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Hang Seng Index surges 4.1 per cent for the best performance since March 2023 after PBOC pledges new financing tools worth US$114 billion

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A cleaner sweeps the grounds in front of the People’s Bank of China headquarters in Beijing. Photo: Bloomberg

Zhang Shidongin Shanghai

Published: 10:03am, 24 Sep 2024Updated: 5:29pm, 24 Sep 2024

Hong Kong stocks jumped by the most in 18 months after China pledged new financing tools worth 800 billion yuan (US$113.7 billion) for buying shares and cuts in borrowing costs as part of a broad package of stimulus measures to bolster the economy and the equity market.

The Hang Seng Index surged 4.1 per cent to 19,000.56 at the close, posting its biggest gain since March 1, 2023. All but five stocks on the 82-member benchmark rose, with financial companies and property developers leading the charge. The Hang Seng Tech Index soared 5.9 per cent.

On the mainland, the Shanghai Composite Index closed 4.2 per cent higher and the CSI 300 Index advanced 4.3 per cent.

The onshore yuan strengthened 0.2 per cent against the US dollar, while the yield on China’s benchmark 10-year government bond rebounded from a record low in an unwinding of haven trade.

To support the stock market, China will set up a swap facility that will allow brokerages, mutual funds and insurers to tap funding from the central bank, Pan Gongsheng, governor of the People’s Bank of China (PBOC), said at a press conference in Beijing on Tuesday. The initial size of the programme will capped at 500 billion yuan but may be expanded in the future, he said.

The central bank will also set up a 300 billion-yuan special relending programme that will give listed companies and major shareholders access to bank loans for stock buy-backs and stake increases, he said, while adding that the nation was studying on a plan for a stabilisation fund.

The PBOC will also cut the reserve requirement ratio by 0.5 percentage point shortly to unleash 1 trillion yuan into the financial system. It will also slash the seven-day reverse repo rate, the down payment ratio for second home purchases and the existing mortgage rate, Pan said.