China stocks took off again on Thursday as Beijing and local governments unveiled new moves to jolt the Chinese economy back to life. While doubts remain over whether the latest moves can yield sustained results, investors are buying into it.
Major Chinese stock indexes are up more than 10% for the week, while U.S. listings for Alibaba (BABA), JD.com (JD) and Nio (NIO) also are flying. Global economic plays including Caterpillar (CAT), Freeport-McMoRan (FCX) and Alcoa (AA) were also in rally mode, as China stimulus lifted the price of copper, aluminum and other global commodities.
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New China Stimulus Measures
The latest reported China stimulus measures include unspecified “living allowances,” cash handouts to the poor ahead of Oct. 1, which marks the 75th anniversary of Communist rule.
Additionally, Shanghai’s government plans to give out 500 million yuan in consumption vouchers for dining, accommodation, cinema and sporting events, according to the Xinhua news service.
Beijing also reportedly plans to recapitalize six big state banks with about $1 trillion in yuan, or $142 billion.
In posts on X, Carnegie Endowment senior fellow Michael Pettis wrote of Shanghai’s vouchers, “This is certainly the kind of stimulus China should be doing, but an amount equal to 0.04% of Shanghai’s fourth-quarter GDP will barely affect the economy.”
Pettis also noted that plan to recapitalize banks, which would help if businesses were eager to borrow to expand production, won’t be a game-changer since China has seen a glut of production.
The new stimulus measures followed Tuesday’s raft of fresh efforts from the People’s Bank of China, the central bank. Those moves included a half-percentage-point cut in existing mortgage rates, saving Chinese households an estimated $21 billion in annual payments, and a cut in down payments required from second-time homebuyers to 15% from 25%.
China’s central bank also said it will establish a swap program to make it easier for companies engage in stock buybacks. Further, Chinese banks will offer a 2.25% rate on loans for stock buybacks and for investment firms to increase shareholdings.
Commodities Stocks Rally: FCX, AA
China consumes about half the world’s copper, so Beijing’s determination to rev up its moribund economy sent the near-term copper futures contract up another 2.1% to $4.58 a pound. The price of aluminum rose 2.2% to $2,594 a ton. Silver jumped 2.4% to $32.79 per ounce.
Commodities plays including FCX, Teck Resources (TECK), AA, and Pan American Silver (PAAS) all flashed early-entry opportunities on Tuesday’s news, and they kept moving higher early Thursday. FCX rose 5.3% in early Thursday stock market action. Teck climbed 4%, Alcoa 5.5% and PAAS 2.4%.
Caterpillar, with exposure to the global mining industry and well as modest exposure to China’s construction sector, jumped 4.3% to 394.57 early Thursday.
CAT stock, a Dow Jones Industrial Average component, is up 6.8% this week, after an equal 6.8% gain last week on the Fed’s big rate cut.
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China Stocks
U.S. traded Alibaba shares, already up 8.1% on the week, climbed another 7.2% on Thursday, pushing the e-commerce giant to a 17-month high.
JD rose 12.1% early Thursday, adding to the week’s 16.6% gain. EV play Nio rose 5.6%, adding to the 7.7% week-to-date rise.
BYD (BYDDF) motored 5% and Tencent (TCEHY) 8.4%, both climbing out of buy range.
On Wednesday, Morgan Stanley downgraded General Motors and the U.S. auto sector, partly due to overproduction in China, even as Tesla‘sTSLA China-based rival BYD flashed a buy signal.
Kanzhun (BZ), which runs a mobile app that connects jobseekers and employers, surged 11.4% early Thursday. Online entertainment site Bilibili (BILI) rallied 11.9%.
Casino stocks with a Macau presence also were rallying.
Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
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