Chinese equities saw a strong rally on Friday as investors reacted positively to news that Beijing is planning a briefing on measures to boost consumption. The CSI 300 Index, which tracks top Chinese stocks, gained 2.4%, marking its biggest daily jump in two months and reaching its highest level since mid-December. Meanwhile, Chinese stocks listed in Hong Kong also climbed 2.8%, reflecting growing optimism in the market.
Policy Expectations Drive Market Optimism
The surge in Chinese stocks comes amid expectations that the government will introduce new policies to stimulate domestic consumption. Authorities from various government bodies, including the finance ministry, commerce ministry, and the central bank, are set to hold a press conference on Monday to outline their plans.
According to Shen Meng, a director at Beijing-based investment bank Chanson & Co., “The press conference on boosting consumption fanned expectations on policy support. But if it falls short of providing details on increasing income, such optimism may weaken to some extent.”
The positive sentiment follows the Chinese government’s decision to set an ambitious economic growth target of about 5% for this year, as announced during the National People’s Congress (NPC) earlier this month. The move has sparked hopes that additional stimulus measures will be implemented to sustain economic momentum.
Key Sectors Leading the Rally
Investor enthusiasm was particularly evident in consumer-related stocks. A sub-index of consumer staples surged more than 5%, marking its biggest gain since November 7. Leading liquor producers, Kweichow Moutai Co. and Wuliangye Yibin, both soared by over 5%. Additionally, stocks linked to China’s birthrate policies, such as Beingmate Co. and Shanghai Aiyingshi Co., hit the 10% daily trading limit after local governments announced new childcare subsidies.
Ken Chen, an analyst at KGI Securities, noted that authorities are expected to discuss various policies, including subsidies for consumer trade-in programs and initiatives to enhance the social safety net. These measures could include expanded childcare and elderly care services, which are crucial for boosting household spending confidence.
Financial Sector Gains Amid Speculation of Liquidity Easing
The rally extended beyond consumer stocks, with Chinese banking stocks also advancing. Investors are positioning for a potential reduction in the reserve requirement ratio (RRR) for banks, a move that would inject more liquidity into the economy. China’s central bank reiterated its commitment to cutting the RRR and interest rates at an appropriate time to support economic growth.
In a separate statement, China’s financial regulator emphasized plans to develop consumer finance to drive domestic consumption. These plans include encouraging banks to accelerate the issuance of personal consumption loans and increasing financing support for service industries such as retail, accommodation, catering, tourism, education, and healthcare.
Looking Ahead: Key Economic Data Release on Monday
Investors are now turning their attention to upcoming economic data scheduled for release on Monday at 10 a.m. local time. Analysts are expecting positive signals from retail sales and investment figures for January and February, which could further reinforce market confidence.
Jeremy Yeo, an analyst at SMBC Nikko Securities in Tokyo, pointed out that while the consumption boost is a positive development for stocks, it remains uncertain whether the rally will be sustained. “It will be interesting if Chinese authorities step in with additional support in the event of a market pullback, potentially establishing the idea of a ‘Xi put’ among investors,” he added.
Conclusion
The latest surge in Chinese stocks highlights renewed optimism over policy stimulus and economic growth prospects. While expectations for government intervention remain high, investors will closely monitor upcoming policy announcements and economic data to gauge the sustainability of the market rally. If Beijing delivers strong and concrete measures, Chinese equities could see continued bullish momentum in the near term.
