China And Hong Kong Markets Rally Following Government Stimulus Pledge

China Stock Markets
A man sits in front of a board showing market information at a securities brokerage house in Beijing (Photo: Reuters / Thomas Peter)

Following the Chinese government's announcement that it was going to be rolling out different measures to boost the country's economy, major indexes in both China and Hong Kong saw marginal bumps as investor confidence increased. Chinese markets rallied on Monday amid renewed optimism, riding on hopes of the positive effects of the announced government stimulus.

The Shanghai Composite Index saw a rise of 2.1 percent at closing on Monday, its best daily performance since the first day of July. Hong Kong's Hang Seng Index also ended up in the green with a 2.2 percent jumped; its biggest daily percentage increase in over two months.

According to analysts, the biggest factor that has drive optimism this week was the announcement from the People's Bank of China (PBOC), which mentioned that it was rolling out measures to boost the Chinese economy. Part of the PBOC's plans included lowering borrowing costs for Chinese firms to hopefully attract new projects and investments.

The PBOC also announced that it will be replacing its existing benchmark lending rate with a more market-driven interest rate system. The news boosted the stocks of real estate development companies, as expectations of increased borrowing amid the easing remained high.

China's largest developer, Country Garden, saw its stocks increase by around 5.8 percent following the news. Property-focused development firm Shenzhen International Holding also saw its stock climb by 7.7 percent.

Some analysts have predicted that the easing of lending costs could pave the way for potential rate cuts, which will be very welcomed by Chinese firms. While the measures are not as drastic as some had expected, it is still expected to provide a much-needed boost to investor sentiment.

The increase in major indexes was also boosted by China's announcement on Sunday that it intends to transform Shenzhen into a global business hub and tech center. The news bolstered the price of major tech stocks in Hong Kong. Shenzhen-based tech giant Tencent saw its stock prices increase by 3.2 percent following the news.

Positive development in the ongoing trade dispute between China and the United States has also managed to bolster investor confidence. US President Donald Trump mentioned over the weekend that he was able to talk with Apple CEO Tim Cook, who had explained to him the negative effects of his planned tariffs on Chinese imports.

Trump mentioned that Cook had made a "good case" and that he was considering their conversation for his next big decisions. Analysts have stated that the news was significant for major markets as Apple does play a significant role in big US tech stocks.

© 2019 Business Times All rights reserved. Do not reproduce without permission.
Sign Up for Newsletters and Alerts