Chinese stocks rise as Beijing promises to take measures to boost the economy

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Chinese stocks jumped on Tuesday, propelled by gains in real estate and technology stocks after the country’s ruling Politburo pledged to boost employment, provide more support for the real estate sector and revive a “crooked” economic recovery.

The CSI 300 Index in mainland China rose 2.6 percent in morning trading, while the Hang Seng Index in Hong Kong rose 3.2 percent. There were also strong gains for Hang Seng Mainland Properties and Hang Seng Tech, which added 11.3 percent and 4.6 percent, respectively.

Hong Kong-listed shares in Country Garden, the largest Chinese developer by sales, rose 13.5 percent after falling 9 percent on Monday along with a sell-off in the sector. Among the leading technology stocks, e-commerce platform rose 6.7 percent.

Chinese bourses outperformed equities in the broader region, with South Korea’s Kospi index adding 0.1 percent and Japan’s Topix down 0.1 percent.

Investors closely watched Monday’s meeting of China’s powerful 24-member Politburo for signs that Beijing will step in to revive the country’s economy, which rebounded strongly at the start of this year after the deregulation of the spread of the coronavirus, but has since lost momentum.

The group acknowledged the economy’s “twisted progress” and said it would work to tackle unemployment, speed up issuance of local government special bonds and boost consumption of electronics, electric vehicles and other commodities.

Line Chart Of Benchmark Performance Year-To-Date (Indexed To 100, In Usd) Showing Chinese Stocks Still Lag Behind Global Peers

She added that the government will work to “stabilize” foreign investment and foreign trade, which have come under pressure in recent months, as well as work to increase international flights, which have not yet fully recovered from the pandemic.

The economy has been plagued by weak consumption, a liquidity crunch in the real estate sector and declining manufacturing, which led to growth of less than 1 percent in the second quarter compared to the previous three months. The Politburo said on Monday that “it is necessary to actively expand domestic demand” and “expand consumption by increasing the income of the population.”

Analysts at Goldman Sachs wrote that the Politburo was “a little more dovish than expected,” noting the various challenges the economy faces, and that they expect more political support in the coming months.

However, economists cautioned that the announcement was light on details. Tuesday’s gains sent Chinese stocks up just 0.3 percent for the year so far, and down nearly 3 percent in dollar terms, far short of the nearly 20 percent rise for the S&P 500 and double-digit gains for peers across the region.

We’ll reserve judgment until we hear some details,” said Robert Carnell, head of Asia Pacific research at ING. “We’ve been given a lot of vague promises already, which don’t amount to much yet.”

Tuesday’s moves also came ahead of a busy week of central bank meetings and monetary policy announcements. The US Federal Reserve announced its monetary policy decision on Wednesday, while the European Central Bank and the Bank of Japan will set interest rates on Thursday and Friday, respectively.

Wall Street’s benchmark S&P 500 closed 0.4 percent higher on Monday, led by energy and financial stocks after a closely watched business survey pointed to slower-than-expected growth in the United States in July, lowering expectations that the Federal Reserve will raise interest rates further. The technology-heavy Nasdaq Composite Index rose 0.2 percent.

Oil prices also rose on Tuesday, with international benchmark Brent crude adding 0.2 percent to trade at $82.94, and US West Texas Intermediate crude rising 0.3 percent to $78.96.

The 2-year and 10-year US Treasury yields were broadly flat.

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