US-listed Chinese Stocks Rise Sharply After PBOC Announces Stimulus

US-listed Chinese stocks experienced significant gains on Tuesday following the People’s Bank of China (PBOC) announcement of a comprehensive stimulus package designed to stimulate the economy.

Among the notable gainers were Tencent Music, which surged by 7.4%, Netease with a 6.9% increase, Alibaba rising by 6%, and PDD seeing a 5.3% boost. The PBOC’s measures exceeded expectations, enhancing investor confidence in the market.

In a report on Tuesday, JPMorgan outlined the key features of the stimulus package, which includes a 50 basis-point reduction in the reserve requirement ratio (RRR), a 20 basis-point cut to the 7-day reverse repo rate, and a 50 basis-point decrease in mortgage rates.

Additionally, the PBOC has standardized downpayment requirements for both first and second homes, which will help improve liquidity in the housing sector. This stimulus is regarded as the most extensive since 2015, aimed at injecting substantial liquidity into the banking system, with potential for further RRR cuts by the end of the year.

JPMorgan emphasized that these easing measures are more significant than those implemented during the COVID-19 pandemic in 2020.

The bank noted, “Today’s announcement from the PBOC surpassed market expectations and is arguably the most comprehensive easing since 2015.” The policy changes are intended to rebuild market confidence amidst ongoing economic challenges such as weak domestic demand and deflationary pressures.

While the PBOC’s measures offer short-term relief, JPMorgan warned that monetary easing alone may not be sufficient to ensure long-term growth, suggesting a need for additional fiscal support.

Despite these concerns, the stimulus package has sparked optimism in the market, positively impacting major Chinese tech stocks listed in the US.

The combination of the stimulus and the possibility of further rate cuts is expected to contribute to the stabilization of China’s economy.