Chinese shares rise as Beijing promises action to boost economy

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Chinese shares jumped on Tuesday led by gains in property and technology shares after the country’s ruling politburo vowed to boost jobs, provide more support to the real estate sector and revive a “difficult” economic reform.

Mainland China’s CSI 300 rose 2.6 percent in morning trade, while Hong Kong’s Hang Seng index was up 3.2 percent. The Hang Seng Mainland Properties Index and the Hang Seng Tech Index also posted strong gains, rising 11.3 per cent and 4.6 per cent, respectively.

Hong Kong-listed shares of Country Gardens, China’s biggest developer by sales, rose 13.5 per cent in line with selling in the sector after falling 9 per cent on Monday. Among major tech stocks, ecommerce platform JD.com rose 6.7 percent.

Chinese markets outperformed equities in the broader sector, with South Korea’s Kospi shedding 0.1 percent and Japan’s Topix shedding 0.1 percent.

Investors closely watched Monday’s meeting of China’s powerful 24-member Politburo for signs that Beijing would take steps to revive the country’s economy, which boomed earlier this year after zero-Covid restrictions were lifted but has since lost momentum.

The group acknowledged “hard progress” made in the economy and said it would work to tackle unemployment, accelerate the issuance of special local government bonds, and boost consumption of electronics, electric vehicles and other goods.

It said the government would “stabilise” foreign investment and trade, which has come under pressure in recent months, as well as work to increase international flights, which have yet to fully recover from the pandemic.

The economy has been plagued by weak consumption, lack of liquidity in the asset sector and weak manufacturing, which led to a growth of less than 1 per cent in the second quarter compared to the previous three months. The Politburo said on Monday that it is necessary to “actively increase domestic demand” and “expand consumption by raising residents’ incomes”.

Analysts at Goldman Sachs wrote that the Politburo was “slightly more lenient than expected” given the various challenges to the economy, and that they expected more policy support in the coming months.

However, economists cautioned that the announcement was light on details. Tuesday’s gains left Chinese equities up only 0.3 percent for the year and down nearly 3 percent in dollar terms, well short of the nearly 20 percent rise for the S&P 500 and double-digit gains for peers around the sector.

Robert Carnell, head of Asia-Pacific research at ING, said: “We will reserve judgment until we hear some details. We already have a lot of vague promises, which have not yielded much results so far.

Tuesday’s steps came ahead of a busy week of central bank meetings and monetary policy announcements. The US Federal Reserve will announce a monetary policy decision on Wednesday, while the European Central Bank and the Bank of Japan will set rates on Thursday and Friday, respectively.

Wall Street’s benchmark S&P 500 closed up 0.4 per cent on Monday, led by energy and financial stocks, as a closely watched business survey indicated slower than expected growth in the US in July, reducing hopes that the Federal Reserve would raise interest rates further. The technology-heavy Nasdaq Composite added 0.2 percent.

Oil prices also edged higher on Tuesday, with international benchmark Brent crude rising 0.2 percent to $82.94 and US marker West Texas Intermediate up 0.3 percent to $78.96.

Yields on the two-year and 10-year US Treasury notes were broadly flat.