Investors want China stocks bull run to sustain even without fiscal stimulus figure

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Investors are hoping that clues about Chinese government borrowing will buoy stocks in Hong Kong and on the mainland

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People on an overpass in Shanghai. Photo: Reuters

Zhang Shidongin Shanghai

Published: 7:30am, 16 Oct 2024Updated: 8:23am, 16 Oct 2024

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.

Over the weekend, Finance Minister Lan Foan did not provide specific fiscal stimulus figures, but he did say China has room to raise the budget deficit, which led some to believe that a large package could still come.

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.

Stocks in China and Hong Kong have been on a tear since the central bank unveiled an easing programme last month, which included lower borrowing costs and an 800 billion yuan funding plan for stock purchases. Benchmarks in the two markets have risen by at least 20 per cent. And even though Beijing did not give colour on what a future stimulus plan might look like, some market participants are crossing their fingers that something will come.

“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”.

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