This week, driven by favorable policies, Chinese stocks have surged. This not only invigorated domestic investors but also boosted the confidence of Wall Street investors across the ocean.

Many Wall Street investors believe that the series of positive policies announced this week demonstrates the Chinese government’s determination to support the economy. Most think that the momentum in Chinese stocks will continue.

Wall Street Optimistic About Continued Rebound of Chinese Stock Market

The CSI 300 index rose 15.7% this week, marking its strongest weekly performance since November 2008. The Hang Seng China Enterprises Index has seen an increase for 11 consecutive trading days, the longest streak since 2018.

As a series of favorable policies were announced and the market remained hot, recent comments from major Wall Street firms further fueled market enthusiasm, leading more traders to believe in the sustainability of this rebound. Additionally, optimistic investors are now favoring Chinese tech stocks, while Wall Street had previously leaned towards more defensive stocks, indicating a noticeable increase in confidence in the Chinese market.

The Market Sees China's Determination to Support the Economy

Manish Bhargava, CEO of Straits Investment Management in Singapore, stated, “The Politburo’s recent statement is reminiscent of Mario Draghi’s ‘whatever it takes’ speech a decade ago, emphasizing a strong commitment to supporting the economy.”

In July 2012, against the backdrop of the Eurozone debt crisis, then newly appointed ECB President Draghi famously said “Whatever it takes,” promising to do whatever was necessary to maintain the stability of the euro.

Bhargava added, “The current surge in the Chinese stock market is very strong.”

Homin Lee, senior macro strategist at Lombard Odier Singapore Ltd., noted, “The Politburo’s communication and the market’s positive response indicate that the Chinese government has taken a proactive stance to combat bearish sentiments through strong fiscal policy and stability guidance in the real estate sector.”

Policy Support Background

The Central Committee of the Communist Party of China held a meeting on September 26, proposing sufficient fiscal spending to ensure the economy achieves its 5% growth target this year. The meeting emphasized expanding the scale of monetary policy, curbing the downturn in the real estate market, and promoting stability in that sector. It also highlighted the expansion of loans for certain real estate projects, showing an increasing government commitment to economic support.

Changes in Investor Sentiment

Some strategists expressed caution regarding the interest rate cuts and other stimulus measures announced earlier this week. However, the meeting of the Central Committee provided additional support for the economy, with investors believing that fiscal policy is crucial for restoring consumer and business confidence. Investment strategist Andy Rothman stated that the government's approach is moving in the right direction, willing to take stronger measures to revive confidence.

Market Outlook and Challenges

Although the government's new statements are enough to spark a stock market rebound, observers remain cautious. They stress that the effectiveness of the policies will be key, especially in stimulating the real economy. Analysts point out that investors may be witnessing a global stimulus policy alignment similar to that of 2015-2016, which could drive funds from U.S. assets to the Chinese market.

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