Chinese stocks surge on promise of ‘moderately loose’ monetary policy
The newly announced measures mark a significant change in China’s monetary policy.
stock of alibaba (NYSE:BABA), JD.com (NASDAQ:JD), Baidu (NASDAQ:BIDU) and other Chinese stocks surged Monday morning after the Chinese government announced stimulus plans aimed at creating a more business-friendly regime.
The Politburo meeting, held early Monday morning, promised “a more active fiscal policy and an appropriately loose monetary policy.” The language used in the reading contrasts sharply with China’s generally “cautious” monetary policy.
In a commentary, Stephen Innes of SPI Asset Management seemed to suggest that the change in tone of the Politburo may be a response to U.S. President-elect Donald Trump’s threat of tariffs on China.
Likewise, the European Union (EU) formally voted earlier this year to impose tariffs of up to 45% on Chinese electric vehicles.
“This represents a significant recalibration of the approach to mitigate the expected economic impact (from tariff increases),” Innes assumed.
The Politburo also pledged to “stabilize” China’s “real estate and stock markets.”
Zhaopeng
A volatile housing market, along with the threat of a potential trade war with the United States since President Trump took office, has weighed on Chinese stocks in late 2024.
But the prospect of state intervention in China’s struggling economy boosted the morale of stock traders on Monday. that iShares China Large Cap ETF (NYSEARCA:FXI), a fairly reliable indicator of large-cap Chinese stocks, rose 6% in pre-market trading.
As the old saying goes, a rising tide lifts all boats. As a result, U.S.-listed shares of prominent China-based companies Alibaba, JD.com and Baidu jumped 6 to 8 percent in early morning trading on Monday.
It is not yet clear whether the market’s rally in relief is premature, with President Trump threatening to impose tariffs of more than 60% on Chinese products imported into the United States. The expected Chinese economic rebound will need to be confirmed throughout next year.
