Stock Exchange: Chinese shares in full boom!

In recent months, Chinese stocks have seen real growth in global stock markets. This resurgence in activity is largely attributed to Beijing’s stimulus initiatives aimed at pulling the Chinese economy out of a slowdown that has worried more than a few investors. However, behind this sudden enthusiasm, questions remain about the sustainability of this recovery. Let’s decipher the causes of this rally in Chinese stocks and what it means for investors.

A cocktail of stimulus measures revitalizing markets

The People’s Bank of China (PBOC) has recently taken a number of strategic decisions to support the economy, including lowering interest rates and reducing banks’ reserve requirements.

This initiative, particularly well received by the markets, aims to free up liquidity and facilitate access to credit for businesses and households.

At the same time, key cities such as Shanghai and Shenzhen announced the imminent lifting of restrictions on property purchases, a crucial move to give a fresh boost to a struggling real estate sector.

This announcement, along with the prospect of new tax measures, instantly spurred investor interest, especially those focused on the Chinese market, causing a notable rise in the valuations of Chinese companies listed abroad, particularly in the United States.

The results were not long in coming: shares of e-commerce giants such as Alibaba, JD.com and PDD Holdings quickly gained value on the stock market.

In the new technology sector, electric vehicle manufacturer Nio and video game platform Bilibili also recorded outstanding performances.

A tech sector on the rise, but doubts persist

In addition to stocks of large companies, exchange-traded funds (ETFs) that focus on the Chinese market have taken off.

The iShares MSCI China ETF saw a significant gain, while the KraneShares CSI China Internet ETF, which specializes in technology companies, saw its shares rise nearly 2 percent.

These increases confirm renewed confidence in Chinese technology, a key sector that has been weighed down by Beijing’s recent restrictive regulations.

However, despite this growth, doubts persist. Indeed, many experts question the depth and duration of this stimulus effect.

China faces significant structural challenges: rising deflationary pressures, domestic demand struggling to recover and a housing sector that continues to slow despite recent measures.

While the current gains in Chinese stocks are undeniable, some analysts point to the tactical nature of these gains.

Investors may indeed be cautious in the medium term, waiting for tangible evidence of a more durable economic recovery before fully committing.

Between hope and caution

The enthusiasm surrounding Chinese stocks illustrates well the immediate effect that targeted stimulus measures can have.

However, this optimism must be tempered by a more nuanced reading of the country’s economic fundamentals.

The Chinese government may be committed to achieving a 5 percent growth target this year, but obstacles remain.

The Chinese economy will not recover overnight, and the effects of current support policies may be limited in time.

Analysts at BCA Research are clear about this: even if tactical gains are likely in the stock market, economic uncertainty still looms.

Chinese stocks have certainly performed strongly in recent days, but investors may be taking a more optimistic long-term strategy. The coming months will be crucial to see if the current momentum can turn into a lasting trend. Meanwhile, Visa and Mastercard stifle innovation by betting millions!

DISCLAIMER

The views, thoughts and opinions expressed in this article are solely those of the author and should not be taken as investment advice. Do your own research before making any investment decisions.