(Bloomberg) — Chinese stocks ended higher following a volatile session as investors awaited the outcome of the government’s planned briefing on fiscal policy on Saturday.
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The CSI 300 Index finished up 1.1% at the close, after gyrating between gains and losses earlier in the day. The benchmark plunged 7.1% in the prior session — its worst performance since early 2020. An index of Chinese shares listed in Hong Kong was up more than 3% before a holiday in the city on Friday.
Traders are pinning hopes that the finance ministry briefing will bring more catalysts to sustain a rally that began late September after Beijing unveiled a barrage of monetary stimulus. Big fiscal measures have been missing from the package so far, and money managers and strategists have warned that the rebound may be another false dawn if pledges aren’t backed up with real money.
Finance Minister Lan Fo’an is expected to introduce moves to strengthen fiscal policy to shore up growth, and answer questions from reporters at a briefing that will start at 10 a.m. local time on Saturday, according to the State Council Information Office.
“Investors are still holding out hope for an announcement from the Ministry of Finance that approves additional government bond issuance on top of this year’s budget to support fiscal spending,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co. “The hurdle is high for the MOF to deliver on the market’s expectations.”
Bernstein Societe Generale Group’s Asia quant strategists on Thursday retained a tactical overweight stance on China in anticipation of “some concrete announcements” either at the finance ministry’s Saturday briefing or after the US election.
Meanwhile, China’s central bank set up a swap facility to provide liquidity to institutional investors to buy stocks, a measure that was announced as part of the broad stimulus package last month.
The People’s Bank of China will accept applications from eligible securities firms, funds and insurers starting Thursday to obtain highly liquid assets such as government bonds and central bank bills if they provide certain collateral. The size of the tool is 500 billion yuan and can be expanded in the future, the monetary authority said in a statement.
Fiscal Package
The CSI 300 Index surged more than 30% from a September low through Tuesday — when trading resumed after the Golden Week break. It tumbled Wednesday on profit taking as traders grew impatient with the pace of Beijing’s stimulus measures.
How long the momentum can last will hinge on the scale and speed of follow-up policy action, with lackluster holiday spending data a reminder that the economy is far from gaining a solid foothold. Any disappointment from the Saturday briefing may renew a selloff.
Turnover for Thursday’s session stood at 2.13 trillion yuan ($301 billion), compared with a record 3.43 trillion yuan on Tuesday and 2.93 trillion yuan yesterday.
The ministry “will likely discuss a supplementary fiscal package for the remainder of the year, although it may be modest in size,” Morgan Stanley economists led by Robin Xing wrote in a note. Economists at Societe Generale SA also said the government is unlikely to announce a “super-sized fiscal stimulus” of 5 trillion yuan to 10 trillion yuan in one go.
The yield on China’s 10-year government bonds declined four basis points to 2.145%. The yuan gained around 0.1% in both onshore and overseas trading.
“The size and scope of the next package could disappoint, especially if it remains modest,” said Billy Leung, an investment strategist at Global X Management in Sydney. “Investors are likely to remain on the edge, with volatility continuing as they wait for clearer forward guidance on the 2025 fiscal outlook. We’ll see more of this back-and-forth until there’s clarity on Beijing’s commitment.”
–With assistance from Charlotte Yang, Wenjin Lv and Tian Chen.
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