China’s CSI 300 Index, which tracks onshore stocks, rallied more than 30 per cent within days of the Sept. 24 stimulus announcement, but has lost close to one-third of those gains.Chinese equities have been on a wild ride since policy-makers unveiled bold stimulus measures in late September to boost the country’s struggling economy and stock market.
“That is the policy bazooka,” he says. “Looking out one year, there is a strong probability the Chinese market will be higher.” Key is that “Beijing has broken free of its policy paralysis,” he adds. “The central question is whether China is serious about reversing negative sentiment and restoring confidence. We believe it is.”
Fiscal support is planned through increased assistance to low-income households and the “long-term unemployed,” he adds. Regina Chi, vice-president and portfolio manager at Toronto-based AGF Investments Inc., agrees that China’s latest policy is significant, but describes it as a “mini-bazooka” in terms of liquidity stimulus.
And local governments will be able to issue special bonds to buy unsold homes to reduce housing inventory and “put a floor” on real estate. Household savings in China, she notes, make up 40 per cent of gross domestic product, so the government wants to unleash consumer spending to have a positive impact on the broader economy and encourage businesses to reinvest. For instance, the government is giving consumption vouchers to buy goods at a discount, she says.is also a large holding. It’s the market leader in gaming globally and has the largest digital platform for social media, she adds.