Chinese stocks jump on steps to boost confidence, but concerns remain

Shanghai/Singapore — Chinese stocks surged on Monday after authorities announced a package of measures at the weekend to boost investor confidence, including halving the stamp duty on stock trading.

China’s blue-chip CSI 300 Index jumped 2.3% by the midday recess, even after giving up some earlier gains having opened up 5.5% and still on course for its best day in a month. Hong Kong’s Hang Seng index advanced about 2%.

The finance ministry, in a brief statement on Sunday, said it is reducing the 0.1% duty on stock trades “to invigorate the capital market and boost investor confidence”.

Separately, the securities regulator, China Securities Regulatory Commission CSRC, said it will slow the pace of initial public offerings and further regulate major shareholders’ share reductions.

“The policy package sent a clear signal to boost investor confidence as the market hit the bottom,” said analysts at China Asset Management.

Shares rose across the board, led by securities brokers rallying about 5%.

“A reduction in stamp duty would benefit securities brokers directly,” said analysts at BOC International (China), as trading activity could increase after the cut.

Real estate developers climbed 4.6% amid the latest measures to aid the sluggish property markets, including relaxing residential housing loan rules and supporting affordable housing.

Other sectors, including insurance, new energy and construction engineering, jumped 2.5%-3.5%.

The measures come as China’s stock benchmark dropped to nine-month lows earlier this month, erasing all gains made after the reopening from Covid-19 curbs, as the economic recovery lost steam.

Beijing has taken a series of measures, including a smaller-than-expected cut in a key lending benchmark last week. But investors are demanding a stronger policy response including massive government spending.

“Compared with previous policy measures, a cut in stamp duty may have a stronger effect in repairing investor confidence,” said analysts at Topsperity securities.

Despite gains in the market, foreign investors sold a net ¥4.3bn ($590.4m) of Chinese stocks via the Stock Connect so far on Monday, having been net sellers in 14 out of 15 previous sessions.

“The market is well versed with the stamp duty cut and its effects. The sentiment boost from such a cut will be fleeting, but its policy intent should not be unheeded,” said Hao Hong, chief economist at GROW Investment Group.

Ting Lu, chief China economist at Nomura, expected the policies’ impact on the market will be short lived if there are no more measures for supporting the real economy.

Underscoring the faltering recovery, latest economic data shows profits at China’s industrial firms fell 6.7% in July from a year earlier, extending this year’s slump to a seventh month.

“Without additional, more aggressive policy stimulus, these stock markets-focused policies alone have little sustainable positive impact on stock markets, not to mention any positive impact on the economy,” Nomura’s Lu said.

Reuters