Tue Oct 08 18:20:43 UTC 2024: ## China’s Stock Market Sees Early Surge, Then Fizzles as Stimulus Hopes Fade

**SHANGHAI** – The Chinese stock market opened Tuesday with a bang, the CSI 300 Index soaring 11% as trading resumed after a weeklong holiday. However, the initial enthusiasm quickly waned as investors were disappointed by the lack of major stimulus measures announced at a key policy meeting.

The CSI 300 ultimately finished the day up 5.9%, while the Hang Seng China Enterprises Index in Hong Kong dropped more than 10%, erasing nearly all of its recent gains.

Anticipation for a strong opening had been building, fueled by a rally in Hong Kong-listed shares, record account openings at Chinese brokerages, and hopes that the National Development and Reform Commission (NDRC) briefing would offer more positive catalysts.

However, the NDRC largely reiterated existing plans to boost investment and support certain groups, falling short of the robust stimulus measures some investors had hoped for.

“The meeting underwhelmed our modest expectations and seemingly those of investors,” wrote Michael Hirson and Houze Song of 22V Research LLC. “While Beijing is keen to revive equities, it does not feel compelled to abandon financial restraint to aggressively stimulate the real economy.”

Despite the initial surge, some market watchers are already raising concerns about overvaluation in the A-share market. The CSI 300 Index is now trading at 13.3 times one-year forward earnings, compared to a five-year median of 11.9 times.

Morgan Stanley strategists cautioned investors to monitor the market’s overheating and the government’s commitment to its recently announced stimulus measures.

“The durability of this China rally will depend on action following words on the fiscal side of the equation,” said Aleksey Mironenko, global head of investment solutions at Leo Wealth. “The key thing we are watching going forward — what policies will be announced in coming weeks following the Politburo and State Council statements?”

Despite the lack of major new stimulus, turnover in Shanghai and Shenzhen reached an unprecedented 3.43 trillion yuan ($486 billion), surpassing the previous record set on September 30th.

The focus on mainland markets led to a sharp decline in Hong Kong-listed Chinese shares.

“There is some convergence in the markets — a rotation from Hong Kong to China,” said Marvin Chen, a strategist at Bloomberg Intelligence. “A-shares are primarily going to be the beneficiary of the domestic liquidity stimulus.”

China’s economic outlook remains uncertain, with sluggish consumer spending and a persistent property downturn posing significant challenges. The government aims for around 5% growth this year, but many analysts believe achieving that goal will be difficult.

While the initial enthusiasm has faded, the Chinese stock market remains volatile. Investors are now closely watching for concrete policy measures to back up the government’s stated commitment to economic recovery.

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