Multi-Asset Weekly: Global Equities Rally Around China’s Stimulus
China’s supportive policies lift markets. Global equity markets extended their upward trajectory last week, buoyed by China’s policy stimulus aimed at reviving its struggling economy. The...
Chief Investment Office - Hong Kong30 Sep 2024
  • Equities: Global equities rallied last week, driven by PBOC’s policy stimulus and government’s strong commitment to meet its 2024 economic growth target
  • Credit: With the Fed lowering rates, IG credit is catching up to short-dated credit due to its higher sensitivity to rate cuts; a barbell strategy, balancing both short and long durations, may optimise returns
  • FX: DXY to test support level at 100 after failing to push above 101 over past fortnight; USD/CNH to extend its fall below 7.00 following last week’s 0.9% decline
  • Rates: Loose financial conditions and stable data points to drive US yields higher; steepening—which played out significantly over past three months—to take a pause
  • The Week Ahead: Keep a lookout for US Change in Nonfarm Payrolls; Japan Jobless Rate
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China’s supportive policies lift markets. Global equity markets extended their upward trajectory last week, buoyed by China’s policy stimulus aimed at reviving its struggling economy. The People’s Bank of China (PBOC) lowered its reserve requirement ratio (RRR) by 50 bps, reduced its seven-day reverse repo rate by 20 bps and cut its medium-term lending facility rate by 30 bps. Furthermore, in the Politburo meeting last Thursday, China’s leaders emphasised the need to drive recovery in their property market and vowed to deploy the necessary fiscal spending to achieve its 2024 economic growth target of 5%. This fuelled optimism in the China equities market with CSI 300 and SHCOMP surging 15.7% and 12.8% respectively.

Major equity indices across regions also notched positive performances last week. The NASDAQ gained 1.0% while the S&P 500 and Dow Jones were up 0.6%. In Europe, the Stoxx 600 and FTSE 100 rose 2.7% and 1.1% respectively. Markets also ended the week positively in Japan with the Nikkei-225 surging 5.6%.

Topic in focus: China Equities – Markets rally on policy easing. The PBOC has recently announced a series of policy easing measures, including the reduction of the RRR and adjustments to policy and mortgage rates. These efforts aim to stimulate investment, enhance liquidity, and restore confidence in financial markets. Coupled with other supportive tailwinds such as the US Fed’s rate cut cycle, a weakening dollar, and investors’ underweight positioning in China equities, China and Hong Kong equities rallied significantly last week; the Hang Seng Index and CSI300 gained 13.0% an 15.7% for the week ending 27 Sep.

While these policies take aim at the sustained recovery of the stock market and broader GDP growth, their effectiveness and successful implementation remain to be seen. Nonetheless, these recent steps have undoubtedly boosted near-term sentiment and raised market expectations. For clients who are underinvested in China equities, this presents an opportunity to add large-cap and index heavy-weights such as technology leaders and quality growth stocks that are at the fore of favourable liquidity flows. On the income side, stay invested in large state banks for reliable dividend yields amid a falling rate environment.


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