Latest market-sensitive news and views - Aug. 28
China has announced measures to support the market, including reducing stamp duty on stock trading and approving the launch of retail funds, but the response from investors has been muted.
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Posted 8/28/2023, 1:52:00 PM
kitco.com
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Chinese authorities have introduced new measures to boost investor confidence in the stock market by reducing trading costs, relaxing rules on share buybacks, and considering extended trading hours and a cut in stamp duty, following recent declines in both the stock and bond markets. These declines have been influenced by China's deteriorating economic outlook, including deflation, weak consumer spending on manufactured goods, rising youth unemployment, and concerns over the property market.
China's securities regulator has announced a series of measures to revive the country's sinking stock market, including cutting trading costs and supporting share buybacks, despite concerns that these actions will not boost investor confidence unless the economy improves.
Global investors are urging China to increase spending in order to revive its struggling economy and address the deepening property crisis, as modest interest rate cuts and vague promises of support have failed to restore confidence in the market. Investors are demanding more government stimulus before considering a return, and the lack of a policy response from Beijing has raised concerns among fund managers. The wishlist of investors includes increased government spending, particularly for local governments and banks, as well as measures to address the property sector crisis and improve communication regarding private business interests.
Chinese authorities are planning to cut the stamp duty on domestic stock trading by as much as 50% in an effort to revive the struggling stock market and boost investor confidence.
There are growing concerns that China's economic growth is slowing, and there are doubts about whether the Chinese government will provide significant stimulus to support its trading partners, including Australia, which heavily relies on China as its top trading partner. China's economic slowdown is attributed to various factors such as trade tensions, demographic changes, a property market slump, and the lack of cash support during COVID-19 restrictions. While some experts remain optimistic that the Chinese government will implement stimulus measures, market sentiment is becoming strained, and patience is wearing thin. The impact on Australia's economy and stock market could be severe, particularly affecting mining companies, banks, construction, tourism, education, and listed fund managers.
Hong Kong Chief Executive John Lee has established a task force to study the possibility of reducing stamp duty on stocks in order to strengthen the local economy, as the move comes after China halved its stock stamp duty in an effort to boost investor confidence.
Asian shares rally as China announces new measures to support its struggling markets, while investors remain cautious ahead of U.S. jobs and inflation data that could impact interest rates.
Chinese blue chips rally as Beijing introduces measures to support the market, including reducing stamp duty on stock trading and approving the launch of retail funds, while US Commerce Secretary Gina Raimondo begins talks with Beijing to boost business ties.
China's stamp duty and margin cuts revive confidence in the Hong Kong stock market, leading to a rally in stocks such as HKEX, Alibaba, and BYD, while China Evergrande continues to struggle.
Chinese officials have implemented aggressive measures to address the lack of confidence in the struggling economy, but analysts believe that more stimulus is needed for a sustained market rally and to stabilize the property sector.
Hong Kong brokers and analysts are calling for a reduction in stamp duty and relaxed listing rules to revive the sluggish stock market, following a decline in turnover after the government increased the stamp duty in August 2021; they suggest that these measures would attract more investors and new listings.
Nomura Holdings believes that China's recent market-boosting measures, including a cut in stamp duty, will not be enough to sustain a rebound in stocks or bolster economic growth without additional policy support for the real economy.
China's stock market indexes experienced a brief bounce of over 5% before giving up most of the gains, following new government measures to reduce trading costs and boost stocks, raising questions about the severity of China's economic problems and whether they can be resolved through stimulus measures.
China's attempts to stabilize its stock market through new initiatives and measures have failed as a brief rally fizzled out, reflecting concerns over the nation's economic health.
Hong Kong has established a 13-member task force to review the stock market's liquidity and improve its competitiveness, including examining the listing regime, market structure, and trading mechanism; however, there was no announcement regarding a reduction in stamp duty on stock trading.
China's government implemented various measures to boost its stock market, including a cut in stamp duty and restrictions on selling shares, but the impact has been limited as the CDI 300 index closed up just 1.2% after initially opening higher, and troubled property developer Evergrande experienced an 87% drop in stock value; foreign investors are pulling their money out of China and want to see more significant policy measures from the government.
Asian stock markets rise on the belief that the Federal Reserve has finished raising U.S. interest rates and hopes that policy stimulus from Beijing will stabilize the Chinese economy, while trading remains thin due to a U.S. holiday.
China's consumer prices returned to positive territory in August as deflation pressures ease, but analysts warn that more policy support is needed to boost consumer demand in the economy.
Chinese property stocks and Japanese government bonds set the tone for global markets as the Hang Seng property index dropped to a fresh September low before rebounding on news that Country Garden won creditor support to delay onshore bond payments, while the Bank of Japan's comments about potential stimulus exit in 2023 pushed the local bond market, and the week ahead is marked by important policy meetings by the Bank of England, the Federal Reserve, and the ECB.
Asian markets are expected to finish the week strong due to positive movements in the U.S. and Europe, although the release of economic data from China may dampen the mood, as it includes indicators such as house prices, fixed asset investment, and unemployment. The Chinese government is aiming to support the economy, but doubts remain about reaching the 5% GDP growth target and trade relations with the West continue to deteriorate. However, if investors continue with the bullish momentum from Thursday, these concerns may be temporarily set aside.
China's central bank has reassured multinational companies such as Tesla and HSBC that it will optimize its policy support after a sell-off in the stock market and concerns over foreign investment, as firms continue to divert investment away from China due to national security regulation and decoupling risks with the US.