Chinese stocks are on track for their best week since 2008 after Beijing launched an economic stimulus package including a $114 billion war chest to boost the stock market.
The CSI 300 index of companies listed in Shanghai and Shenzhen is up nearly 15 percent for the week, its best performance since November 2008, when China announced a similar stimulus package in response to the global financial crisis.
The recovery comes as Chinese leaders race to support the country's capital markets, stabilize the crisis in the real estate sector and boost domestic consumption to meet its 5 percent economic growth target for the year .
The People's Bank of China on Tuesday unveiled an 800 billion RMB ($114 billion) loan pool for the country's capital markets, including funds to lend to companies to buy back their own shares and to lend to financial institutions non-banks such as insurers to purchase local securities. actions.
The CSI 300 index climbed 3.8 percent on Friday while Hong Kong's Hang Seng index rose 2.8 percent, up more than 12 percent since the start of the week, its best weekly gain since August 2007, when it reached record levels just before the start of the week. global financial crisis.
We are at a pivotal moment for China's economy and its stock market, said Nicholas Yeo, head of China equities at Abrdn, who said in a note that the U.S. Federal Reserve's recent interest rate cut would also a significant favorable wind.
Easing global conditions are poised to boost consumption, a boon for China, the world's largest exporter, he said.
Hopes for further stimulus measures in China also supported European stocks. The region-wide Stoxx 600 index closed at a record high on Thursday, pushed higher by luxury groups that stand to benefit from higher consumer spending in China.
China's rally followed Wall Street's gains after the S&P 500 closed Thursday at a record high for the third time this week, with stocks climbing ahead of Friday's inflation report.
In August, Chinese authorities restricted daily data heading north through the Hong Kong Stock Connect program, which shows flows of foreign investors into mainland stocks.
But Citi said the past three days have been the busiest period for Citis's equities sales and trading team in the Asia region, with record client flows into Hong Kong and China equities continental.
The Shanghai Stock Exchange issued a notice on Friday warning investors of abnormally slow trading due to frenzied morning trading, two people familiar with the matter said.
We can't dismiss this as old policy, said Winnie Wu, equity strategist at Bank of America. This is the first time that the government has encouraged leveraged investment in the stock market. A liquidity-led rally should still leave significant room to maneuver.
David Chao, global markets strategist at Invesco, said the rally in Chinese stocks could be sustained. Chinese markets are poised for momentum, and I see some parallels between the current recovery and that of 2014-15, when the Shanghai index rose about 150 percent between June 2014 and June 2015, but then collapsed.
Chao added that as the dollar continued to weaken due to the Federal Reserve's interest rate cuts, he anticipated a possible rotation of expensive and crowded global technology trade toward cheaper markets. [emerging market] assets.
