Record-Breaking Growth in Chinese Stocks: But Why?

Last week marked the best performance for Chinese stocks since 2008, and the rally continues. What’s fueling this new economic surge in China?

In response to the economic slowdown, Beijing has rolled out new stimulus measures, with a swift and visible impact on the stock market.

For instance:

• The Shanghai Composite Index jumped 5.7%;
• The Hang Seng Index rose by 3.34%.

SSE Composite Index, source Investing.com

On Sunday, September 29, China’s central bank announced that it would instruct commercial banks to lower mortgage rates by the end of October as part of its efforts to support the housing market. This immediately caused a sharp uptick in real estate stocks. Additionally, cities such as Guangzhou, Shanghai, and Shenzhen either relaxed or removed existing restrictions on home purchases.

These actions were the latest in a series of aggressive stimulus policies rolled out by Beijing last week — from significant interest rate cuts to fiscal support measures — aimed at stabilizing the economy.

It's really a big turnaround, the policies are so intensive, we have never seen such clear instruction to stop housing prices declining and support the stock market,

said Dickie Wong, Executive Director of Research at Kingston Securities.

Experts believe this could be the start of a more stable market if Beijing continues to provide ongoing economic support.