China Shares Surge Amid U.S. Rate Cuts and Economic Stimulus Hopes

China's stock markets rebounded, led by real estate developers and consumer goods, as U.S. rate cuts sparked hopes for economic stimulus from Beijing. The blue-chip CSI300 Index and Shanghai Composite Index rose, and Hong Kong’s Hang Seng gauge climbed, driven by expectations of rate cuts in China. Enhanced investor sentiment contributed to market gains.

China's shares showed a remarkable rebound on Thursday, propelled by gains in real estate developers and consumer goods. This rally came as the commencement of anticipated U.S. rate cuts kindled expectations that Beijing will have more flexibility to stimulate its struggling economy. Both the blue-chip CSI300 Index and the Shanghai Composite Index experienced gains of 0.8% and 0.7%, respectively.

In Hong Kong, known for its sensitivity to external monetary conditions, the Hang Seng Index surged 2%, reaching a two-month high, while the Hang Seng Tech Index soared over 3%. On Wednesday, the U.S. Federal Reserve initiated a series of projected interest rate reductions, starting with an unusually large half-percentage-point cut.

Investor morale improved considerably as the U.S. rate cut suggested more maneuvering room for Beijing to ease monetary policies without significantly depreciating the yuan. A poll by Reuters indicates that China is expected to lower its key policy and benchmark lending rates on Friday.

Yan Wang, chief emerging markets and China strategist at Alpine Macro, pointed out that China's domestic economic policies have a greater impact on the growth outlook than the Fed's decisions. Meanwhile, Shen Zhengyang, an investment advisor at Northeast Securities, noted that the market's rebound sustainability hinges on the extent and strength of China's easing measures.

Shen commented that if China cuts its benchmark lending rates, lowers mortgage rates, reduces reserve requirement ratios (RRR), and increases bond issuances to bolster the economy, the stock market could see a 5-10% increase. The CSI Real Estate and Liquor Indexes gained 3.5% and 2.7%, respectively.

The consumer staples sector saw a 1.2% rise, the healthcare sub-index grew by 1%, and the financial sector climbed 0.5%. Meanwhile, in Hong Kong, the Monetary Authority slashed its base rate via the overnight discount window by 50 basis points to 5.25% on Thursday.

Hong Kong's monetary policy aligns closely with that of the U.S. due to the city's currency peg to the U.S. dollar within a range of 7.75-7.85 per dollar. Mainland property stocks listed in Hong Kong saw a robust increase of 5.5%, while local real estate firms rose by 2.3% following the interest rate cuts.

(With inputs from agencies.)