China-Linked Stocks Rise Amid Array of Stimulus Measures, Reports Reuters

By Lisa Pauline Mattackal and Purvi Agarwal

U.S.-listed shares of Chinese companies and China-focused funds experienced a significant increase on Friday, building on a strong momentum fueled by aggressive stimulus measures aimed at boosting the economy of the world’s second-largest market.

The People’s Bank of China (PBOC) recently implemented a reduction in interest rates and decreased the reserve requirement ratio for banks by 50 basis points.

Reports indicate that cities such as Shanghai and Shenzhen are planning to lift essential home purchase restrictions in the coming weeks, with additional fiscal measures anticipated.

The U.S. listings of prominent Chinese e-commerce firms saw notable gains, with Alibaba rising by 3.1%, JD.com increasing by 3.9%, and PDD Holdings gaining 5.8%.

In the electric vehicle sector, Nio rose by 6.2%. The gaming company Bilibili experienced a 5.4% increase, while Baidu, a leading search engine, surged by 4%.

Exchange-traded funds that track the Chinese market also saw significant gains, as domestic stocks recorded their best week since 2008. The iShares ETF climbed 1.6%, reaching its highest level since February 2023, while the tech-focused KraneShares CSI China Internet ETF nearly rose by 4%.

If the gains persist, the MCHI fund may achieve nearly 20% growth for the week, marking its best performance since its inception in 2011, while KWEB could surpass a 26% increase, representing the largest weekly gain in over two years.

Analysts suggest that short-covering might be influencing this week’s gains, as traders who bet on falling shares are buying stocks to close their positions.

However, many analysts express skepticism about whether the stimulus measures will be sufficient to reignite interest in China, once a leading growth story, as deflationary pressures, sluggish consumer demand, and a severe downturn in the property market continue to make investors wary.

Analysts from BCA Research stated, "Chinese equities, China-focused assets, and other pro-cyclical investments are likely to see further tactical gains." Nevertheless, they caution that the ramifications for the Chinese economy remain uncertain at this time.

On Tuesday, shares surged after the PBOC announced its most significant easing measures since the pandemic, but retreated on Wednesday as investors questioned the adequacy of these actions. However, commitments from policymakers for necessary fiscal stimulus to achieve this year’s 5% growth target seemed to alleviate some concerns.