As mainland China stocks prepare to reopen on Tuesday after a week-long holiday, investors are eagerly awaiting fresh policy directions from the National Development and Reform Commission (NDRC). The NDRC, led by Chairman Zheng Shanjie, is expected to announce the implementation of previously unveiled stimulus measures during a press conference.
Economists and market traders are closely monitoring the event, expecting additional fiscal stimulus as Beijing aims to revitalize its economy and hit the 5% annual growth target. Recent policies, such as interest rate cuts, relaxed property purchase rules, and liquidity support for stock markets, have driven a strong rally in Chinese equities. The CSI 300 blue-chip index, which tracks some of the largest companies listed in Shanghai and Shenzhen, surged by over 25% before the holiday.
Market Rally Expected to Continue
Futures contracts tied to the MSCI China A50 Connect Index, which includes 50 mega-cap A-share stocks, surged nearly 15% over the holiday, signaling optimism about further economic support. However, while optimism persists, experts warn that the momentum could falter if Tuesday’s announcements lack sufficient detail or fail to introduce new, effective measures.
Analysts like Erica Tay from Maybank suggest that the market is eagerly waiting for Beijing to add “meat on the bones” to its previously announced fiscal initiatives. The real test will be whether the stimulus addresses key issues such as boosting consumer confidence and supporting the real estate sector, which has been sluggish.
Challenges Ahead
Despite the positive outlook, concerns remain about how aggressively policymakers will act to support growth. Economists from Morgan Stanley expect a fiscal package worth 2 trillion yuan ($275 billion), but there are concerns that the actual package may underwhelm expectations. Similarly, experts like Eugene Hsiao from Macquarie Capital warn that while China has historically relied on fiscal stimulus, the effect on markets may be muted if it does not sufficiently boost wages and consumption.
In the short term, the rally may continue, but many are watching closely for how soon and effectively these policies will be implemented.