China to adopt more proactive fiscal policies and “moderately loose” monetary policies to boost domestic demand, Politburo readout says
Hong Kong stocks staged their biggest rally in seven weeks after China’s top policymakers said they would wield more proactive fiscal and looser monetary policies just days before a key economic policy meeting, outweighing an earlier report that showed lingering deflationary pressure.
The Hang Seng Index jumped 2.8 per cent to 20,414.09 at the close, finishing above the 20,000-point mark for the first time since November 11. The single-day gain was the steepest since October 18. The Hang Seng Tech Index surged 4.3 per cent. China’s CSI 300 Index shed 0.2 per cent and the Shanghai Composite Index eased 0.1 per cent.
Wuxi AppTec and affiliate Wuxi Biologics jumped after draft legislation sanctioning Chinese biopharmaceutical firms was removed from a US defence bill. Zijin Mining Group advanced after China’s central bank resumed its gold purchases. New Oriental Education and Technology and Kuaishou Technology both dropped on their first day as members of the Hang Seng Index.
Buying accelerated in the final hour of trading after a readout from a December Politburo meeting chaired by President Xi Jinping said that China would adopt more proactive fiscal policies and “moderately loose” monetary policies next year to boost domestic demand.
The monetary policy rhetoric was the same as what China’s central bank used in 2009 to mitigate the fallout from the global financial crisis, according to Zhang Zhiwei, an economist at Pinpoint Asset Management. That compared with the “prudent monetary policies” that top policymakers referred to at key meetings over the past few years.
“The message from Politburo meeting indicates a change in policy stance to help the economy,” said Zhang. “This shows the government recognises the urgency of the economic challenges China faces. Another positive signal … is the government plans to boost consumption significantly.”
The Politburo meeting readout came just days before an annual economic work conference, where Xi and other top policymakers are expected to convene this week to map out key economic policies for 2025. Fresh catalysts will be needed to sustain momentum for stocks in China and Hong Kong, where rebounds have shown signs of losing steam recently.
Earlier Monday, stocks fell after a report released by the National Bureau of Statistics showed that producer prices dropped by 2.5 per cent from a year earlier for the 26th consecutive month of declines in November. Consumer prices rose by 0.2 per cent from a year earlier, decelerating from a 0.3 per cent increase for the previous month.
“There is still plenty of room for monetary policy easing in the months ahead,” said Lynn Song, an economist at ING. “Markets have been discussing the possibility of an imminent [reserve requirement ratio] cut which is certainly on the table, but the inflation data shows that there is capacity to bundle an RRR cut with a further interest rate cut as well.”
China is likely to pledge to stabilise the property market at the central economic work conference, as well as roll out some measures to repair the fiscal policy mechanism and introduce some policies to boost consumption by supporting social security for lower-income households and encouraging childbirth, according to Nomura Holdings.
Wuxi AppTec soared 9.6 per cent to HK$59.85 and Wuxi Biologics also jumped by that much to HK$19 after the so-called Biosecure Act was not added to a US defence bill, giving Chinese biotech firms some relief.
Zijin Mining added 1.2 per cent to HK$15.88 after the People’s Bank of China bought 160,000 ounces of gold in November, its first purchase in seven months.
New Oriental Education advanced 2.2 per cent to HK$50.75 and short-video platform operator Kuaishou added 1.8 per cent to HK$48.45.
Other major Asia-Pacific markets were mixed. Japan’s Nikkei 225 climbed 0.2 per cent and Australia’s S&P/ASX 200 rose less than 0.1 per cent, while South Korea’s Kospi retreated 2.8 per cent, with its political turmoil continuing to unfold.