Chinese stocks experienced a significant surge on Tuesday following Beijing’s commitment to implementing measures to strengthen the country’s struggling economy. The Hang Seng Index in Hong Kong saw an impressive increase of over 3%, the ChiNext, which consists of technology-heavy companies in China, rose by 1.8%, and the Shanghai Composite Index also grew by 1.81% during Tuesday morning in Asia. Notably, Chinese property developers Country Garden and Longfor witnessed substantial gains of 14.3% and 20.7% respectively. Additionally, Sunac experienced a 12.5% rise, while China Vanke and China Overseas Land and Investment grew by 11.02% and 11.39% respectively.
The surge in stock prices follows a previous decline in Chinese real estate stocks due to concerns over mounting debt. In August 2020, the Chinese government implemented stricter regulations on the debt levels of the property sector. However, on Monday, China’s top leaders pledged to provide increased policy support to stimulate domestic consumption, as the post-Covid economic recovery has been slower than anticipated.
Official data indicates that China’s gross domestic product (GDP) in the second quarter grew by 6.3% compared to the previous year, falling short of economists’ predictions of 7.3%. This represents a growth of 0.8% from the first quarter, which is slower than the 2.2% quarter-on-quarter pace recorded from January to March.
During the highly anticipated Politburo meeting on Monday, China’s top leaders hinted at potential adjustments and optimizations to property policies as part of their efforts to navigate the challenging economic recovery. State news agency Xinhua quoted the 24-member Politburo, stating that “the economy is facing new difficulties and challenges,” primarily due to weak domestic demand, operational obstacles for companies, and a complex external environment.
The meeting emphasized the need to actively expand domestic demand, with a particular focus on the crucial role of consumption in driving economic growth. The report from Xinhua stated, “It is necessary to boost the consumption of automobiles, electronic products, and home furnishing, and promote the consumption of services such as sports, leisure, and cultural tourism.”
In Hong Kong, shares of internet giants experienced a rise on Tuesday. Alibaba shares soared by 4.7%, while Tencent increased by nearly 4%. Meituan and Baidu also witnessed gains of 5.7% and 6.8% respectively. The electric vehicle sector also saw positive movement, with Xpeng surging by 11%, Li Auto rising by 4.15%, and BYD experiencing a 2% increase.
Xiaolin Chen, head of international at KraneShares, stated on CNBC’s “Street Signs Asia” that this surge in the Chinese stock market signifies that policymakers have acknowledged the market’s concerns regarding the need for further support for the domestic economy. Chen emphasized the importance of job creation to achieve China’s target of 5% GDP growth for the year. The encouraging language used in the government’s statement has alleviated concerns surrounding the real estate market, employment, private investment, and other pertinent issues. Thus far, the language has been reassuring.
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