From Zeeshan Mirza
KARACHI: While boosting confidence of both local and foreign investors in the economy and tackling negative sentiment, China announced an aggressive and belated stimulus package on September 24, which triggered the biggest weekly stock market rally in the past 15 years.
It comes amid rising tensions in the Middle East after pager and walkie-talkie attacks by Israeli agents on Hezbollah members in Lebanon around two weeks ago caused disruption in the global supply chain. Similarly, the Russia-Ukraine war is fanning flames of nuclear escalation in Europe, which along with the US is paying the price of the war.
Western publications never hesitate to depict a gloomy economic outlook of China, but in reality China is a fast-growing economy and ranked the second-largest economy after the US.
The aggressive stimulus package has silenced such publications with both local and foreign investors instilling more confidence in China’s economy.
Now, domestic investors particularly feel more satisfied with trust in their government. Major indices have soared more than 25% while the Shanghai Stock Exchange suffered glitches due to high volumes.
According to the Economist, the package, unveiled by top regulators, includes a policy rate cut, mortgage rate cuts and 800 billion yuan ($114 billion) in support for the stock market.
Two days later, a meeting of the Politburo, a group of China’s 24 most senior leaders, drove the point home by using phrases such as “action comes first”, rather than a passive verbiage repeated in recent years. At another high-level meeting on September 29, Chinese premier Li Qiang pledged to speed up the implementation of announced measures.
Debate over the effectiveness and scale of this long-awaited bailout has raged. But local and foreign investors agree on one point, Chinese President Xi Jinping has sprung into action to address the problems afflicting the economy and changed the approach to fix them.
Social media has been flooded with stock-picking tips, even though most stocks listed in China and Hong Kong have surged and all investors have turned down gloomy economic news such as the data released on September 27 that showed industrial profits tumbled almost 17% year-on-year in August.
The shift has given foreign investors a whiplash. Just four days before the unveiling of stimulus, the People’s Bank of China (PBOC), the central bank, declined to cut rates, causing many investors to sell more of their Chinese holdings.
