Chinese stocks hit 2-year high on Beijing's aggressive stimulus measures
What's the story
Chinese shares have soared to a two-year high today, extending the recent strong rally.
The surge comes as trading resumed after a week-long holiday, driven by investor optimism over stimulus measures to bolster the economy. The blue-chip CSI300 index jumped 10% in early trade, hitting its highest since mid-2022.
Meanwhile, the Shanghai Composite also jumped 9.7%, hitting its best levels since December 2021.
Market fluctuations
Hong Kong's Hang Seng index and yuan face downturn
Unlike the mainland markets, Hong Kong's Hang Seng index, which had hit a two-and-a-half-year high on Monday, fell by 2.8%.
The yuan also witnessed a major drop, falling sharply to 7.0502 per dollar. Meanwhile, five-year bond futures fell to their lowest since July.
These market fluctuations underscore the disparate impact of economic factors on different sectors within the region's financial landscape.
Anticipated disclosure
NDRC's press conference expected to reveal stimulus details
The National Development and Reform Commission (NDRC) has called a press conference today where more details of the stimulus measures fueling the market surge are likely to be unveiled.
Before the holiday break, China had unveiled its most aggressive stimulus measures since the pandemic started.
This announcement had propelled the CSI300 by 25% over five sessions and record-breaking gains for both CSI300 and Shanghai Composite last Monday.
Market response
China's aggressive stimulus measures spark market frenzy
The aggressive stimulus measures announced by China have sent the market into a frenzy, with turnover soaring as heavy buying strained brokers and trading systems.
These measures include rate cuts and hints at fiscal support to bolster an economy that is underperforming by Chinese standards. Hedge fund manager David Tepper had expressed his optimism about these moves on CNBC before the Golden Week holiday break, stating that he would buy "everything" on China.
Caution advised
Analysts urge caution amid China's market surge
Despite the market surge, some experts are advising caution due to the significant gains.
"China's weighting in the MSCI EM Index rose from 24% in August to 30% now, and its continued outperformance may drive a self-reinforcing 'pain-trade' before the year-end," warned analysts from Bank of America.
They also predicted that the "'buy everything' stage will be over soon," indicating a potential shift in market dynamics.