Chinese Stocks, ETFs Struggle As Multi-Trillion-Yuan Stimulus Hopes Fall Short, Yet More Measures 'Are Still On The Table'

Benzinga · 10/14 15:49

U.S.-listed Chinese stocks faced a sluggish start to the week.

Investor sentiment faltered following a high-level briefing from Chinese authorities that lacked the concrete stimulus measures many had anticipated.

Despite signals of increased fiscal support, the absence of a large-scale economic package left traders underwhelmed.

Weekend Briefing Misses Expectations

To stabilize the economy, the Chinese Ministry of Finance (MoF) hinted at a press conference on Oct. 12 that it may raise the government debt ceiling, support local governments, address issues in the property market, and bolster major banks.

However, the MoF stopped short of announcing the multi-trillion-yuan stimulus package that markets had hoped for.

The lack of details on measures to boost consumer demand and spark a stronger economic recovery weighed heavily on investor sentiment.

Key Announcements

  • The MoF indicated that $300 billion (RMB2.3 trillion) in local government special bond funds would be used in Q4, suggesting a more aggressive fiscal push toward the end of the year.
  • The National Development and Reform Commission (NDRC) announced plans to pre-approve RMB200 billion worth of projects for 2024 by the end of October, intending to start construction by year-end.

Analyst Reactions

Helen Qiao, Asian economist at Bank of America, emphasized that the market had been eagerly awaiting more specific details about the upcoming fiscal stimulus.

"Markets have been keen to know the size, timing, and composition of any potential fiscal package," she said in a note.

“While the Oct. 12 announcement appears to lack details, in our view, it does not rule out a decent-sized fiscal package to be rolled out in the coming weeks,” Qiao added.

Qiao also indicated that while more measures to boost consumption ‘are still on the table,’ though they are not expected until 2025.

“As we have cautioned earlier, the MoF is not in the capacity of announcing any budget revisions before receiving greenlights from the NPC.”

Hui Shan, an economist at Goldman Sachs, saw the briefing as a sign that China is refocusing its economic policy towards growth.

“Although the much-anticipated Ministry of Finance (MoF) press conference on October 12 did not spell out great details on the upcoming fiscal stimulus package, officials provided strong forward guidance on increased fiscal support,” Shan said.

She further highlighted a shift in policy focus: “The Chinese government has clearly made a turn on cyclical policy management and increased its focus on growth.”

As a result of this shift, Goldman Sachs revised its fourth-quarter growth forecast, raising it from 5.5% to 7.5% on a quarter-over-quarter basis. The firm also increased its 2024 GDP forecast from 4.7% to 4.9%, and raised its 2025 GDP forecast from 4.3% to 4.7%.

Mixed Performances For Chinese Stocks

Following the announcement, U.S.-listed Chinese stocks experienced a mixed response. Several key names suffered losses as disappointment over the lack of immediate stimulus took hold.

  • Alibaba Group Holdings Ltd. (NYSE:BABA) slipped 0.6%.
  • PDD Holdings Inc. (NASDAQ:PDD) fell 2.8%.
  • Baidu Inc. (NASDAQ:BIDU) dropped 3.9%.

However, not all stocks saw declines:

  • JD.com Inc. (NASDAQ:JD) bucked the trend, rising 2.3%.
  • KE Holdings Inc. (NASDAQ:BEKE), a real estate broker, surged over 5% on optimism about future property market support.

Chinese ETFs also reacted, largely trending downward:

  • iShares China Large Cap ETF (NYSE:FXI) stayed flat.
  • iShares MSCI China ETF (NYSE:MCHI) dipped 0.3%.
  • KraneShares CSI Internet China ETF (NYSE:KWEB) fell 0.9%.
  • Invesco Golden Dragon China (NASDAQ:PGJ) declined 0.7%.
  • First Trust China AlphaDEX Fund (NASDAQ:FCA) dropped 0.5%.
  • iShares China Multisector Tech ETF (NYSE:TCHI) slid 1.2%.
  • Franklin FTSE China ETF (NYSE:FLCH) edged down 0.2%.

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