China's stock rally resumed Tuesday after the weeklong National Day holiday but lost some steam on mainland markets after a press conference by the country’s economic planning agency disappointed hopes for more fiscal stimulus measures.
In Hong Kong, the day ended with chunky losses of nearly 10%.
Early in the day, the Shanghai Composite Index rose more than 10%, the Shenzhen Component Index was up more than 12%, and the ChiNext Index rose 18%, continuing a rise that began late last month with the announcement of stimulus measures, ranging from rate cuts to looser curbs on house buying.
The rally stalled, however, as the National Development and Reform Commission, at a press conference intended to further boost market confidence, failed to announce any specific stimulus measures.
By day’s end, the Shanghai Composite Index rose 4.59%, the Shenzhen Component Index was up 9.17%, and the ChiNext Index rose 17.25% to mark its largest-ever, single-day increase. But in Hong Kong, the Hang Seng index traded low throughout the day, returning the gains registered before the National Day holiday and closing down 9.41%.
Investors hoped the National Development and Reform Commission, China’s state economic planning body, would roll out more detailed stimulus measures at the Tuesday briefing.
Chairman Zheng Shanjie told reporters that he had “full confidence” the economy would reach its official full-year growth target of about 5%. He said China will introduce policies to specifically strengthen or stabilize five aspects in the early stage, including the economic downturn, insufficient domestic demand, the difficulties of some enterprises, the continued weakness of the property market and the capital markets.
Chin-Yoong Wong, a professor of economics at Universiti Tunku Abdul Rahman in Malaysia, said the NDRC's target issues are “very to the point but insufficient in implementation," because the NDRC has not proposed precise and feasible countermeasures, and the scale of implementation is unclear.
Wong said much of what has been promised by the NDRC includes spending plans that were already in place "rather than additional fiscal stimulus for China's economic downturn."
He said the NDRC has talked a lot about boosting consumer confidence but has not issued any specific practical policies to achieve that, leaving shareholders to question whether the talk will be backed with action.
Liu Meng-Chuh, director of the First Research Division at the Chung-Hua Institution for Economic Research in Taipei, said external factors are contributing to the volatility of China's stock markets.
He told VOA, "On the one hand, China's [favorable policies] are not so strong; [on the other hand], the U.S. economy is not so bad, so maybe much international hot money has begun to flow back [to the U.S.]."
However, Liu believes that there is still room for development in green industries and infrastructure for an aging society.
He said that China's urban population is about 60% to 70% of its entire population, which is lower than the average of about 80% in mature economies, meaning that the dividends of China's "urbanization" have not yet been exhausted. But he stressed that the feasibility has to be well-assessed to avoid repeating mistakes made in the past.
Tsai Ming-Fang, a professor of industrial economics at Tamkang University, said China's foreign relations are not improving, causing foreign trade issues that are difficult to solve, such as the new tariffs imposed by Canada and the European Union on Chinese electric vehicles.
Tsai said the stimulus measures in the past two weeks are not designed to revive the economy but to beautify the data to achieve the economic growth target of 5% this year, which may allow some shareholders and even foreign investors to liquidate their positions and take profits.
"China's only goal now is to reach the economic growth rate of 5%,” Tsai said. “Many problems arise from the drastic changes in Chinese laws [in recent years], which have led to a lack of confidence of manufacturers in China.”
Adrianna Zhang contributed to this report.
