China's benchmark index CSI 300 ended with gains of over 2% after briefly slipping into red, and coming out of its worst week since July, as market participants digested Saturday's briefing by the Finance Ministry which did not enthuse some sections of investors.
Some analysts had expected China to deploy as much as 2 trillion yuan, or $283 billion in fresh fiscal push on Saturday. However, a lack of specifics in the briefing disappointed many, including Arvind Sanger of Geosphere Capital, who told CNBC-TV18 that the briefing was 'disappointing'. Anything above 2 trillion yuan would have been seen as positive by investors in Chinese equities. "China is a trade, and not a long term positive," Sanger added.
China has left investors guessing on the overall size of the stimulus announcement made on Saturday, seen as a key metric to gauge the longevity of its stock market rally. Another indicator, the monthly export-import data released on October 14 has been below expectations, as per a Reuters report. China's exports continue to be weighed down by a 'confidence issue', according to the China Market Research Group. Increasing duty restrictions being imposed by EU, US and even India on Chinese exports are also weighing on China's macros.
China has one more reason to be cautious with the announcement of stimulus measures, as trends in US election are hinting at Republican nominee Donald Trump nudging ahead of Democrat candidate Kamala Harris in terms of popularity, as per one NBC News poll. Sanger said a Trump victory will mean a serious threat to China in terms of tariff barriers, and China may need to keep a buffer of counter-measures in its kitty. This, he said, could lead to some volatility in the inflows into Chinese equities.
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Donald Trump has proposed at least a 10 percent tariff on imports and up to 60 percent on Chinese goods, ratcheting up the levies that he had previously imposed on Beijing, and other nations.
Benjamin Cavender of China Market Research Group told CNBC-TV18 that he sees China rolling out a big stimulus by the end of the month. "Businesses are not keen to borrow, as consumption has been subdued," he added.
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No date has yet been decided for the next meeting of China's legislative body, where it is expected approve additional debt issuance, however, market participants expect a decision in the coming weeks.
China has been facing serious challenge on domestic front, with demand slacking as consumers refrain from spending more, and unemployment remains high, especially for entry level jobs, Cavender said. "They (Chinese government) are not able to drive the consumer sentiment," he added.
China watchers are now hoping for the measures announced so far to trickle down into some economic impact. "One week with a rally of 20 percent, that has been a very, very rare scene to experience. But obviously, they have to trickle down. It will be now a liquidity-driven rally, which hopefully will be supported by the trickling down of that impact into growth, into long-term economic effects," Reuters quoted Hubertus Vaeth, managing director, Frankfurt Main Finance.
China’s Bureau of Statistics is set to release the third-quarter GDP data on Friday, October 18, along with other key metrics like retail sales and industrial production for September.
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