Chinese stocks experienced their biggest single-day gains since 2008 on Monday, 30 September, with investor sentiment buoyed by a week of government stimulus aimed at revitalising the economy.
Indexes, including the benchmark CSI-300 blue-chip index, the Shanghai Composite Index, the Shenzhen Composite Index, and Hong Kong’s Hang Seng Index, rose between 3.3% and 11%, restoring US$1.8 trillion in value across the three cities’ exchanges during the rally. China’s Tech Index, alongside the stocks of Alibaba and real estate developers (which have been particularly beleaguered in recent years), saw notable gains.
Investors rushed to buy into the surging markets ahead of the week-long National Day holiday, which began on Tuesday, 1 October and halted trading. Interestingly, there was a spike in Gen Z and millennial investors who, driven by fear of missing out on the rally, rushed to open online accounts, overwhelming some online trading platforms.
The measure offering perhaps the biggest boost to the market was a swap programme allowing companies (funds, insurers, and brokers) to provide assets like shares or bonds as collateral to the central bank in exchange for credit or cash, enabling them to access liquidity more easily for stock purchases.
The stock market surge was driven by the broad range of government stimulus measures introduced between 24 September and 29 September. These included cuts to bank lending rates, access to cheap funds for brokers to buy stocks, reduced mortgage rates, and eased restrictions on house purchases, with the latter two announced on Sunday.
Global investors, who have been reducing their exposure to China during the past three years of economic downturn, are now expected to rebalance their portfolios, which may boost the market rally further.
Beijing’s policy measures will take time to impact the real economy and stimulate a recovery in consumption, but analysts say the government has demonstrated a strong commitment to economic recovery. According to Deutsche Bank, Beijing has adopted a “whatever it takes” approach to restoring market confidence by supporting asset prices, with a clear willingness to take further action if necessary.