China and Hong Kong Markets Surge to Historic Highs

China and Hong Kong stocks achieved their strongest weekly performances in 16 years, driven by an aggressive stimulus package from Beijing. The CSI300 and Shanghai Composite indexes saw significant gains, with similar positive movements in Hong Kong's Hang Seng index. Key actions include reserve ratio cuts and fiscal stimulus plans.

China and Hong Kong stocks are experiencing their best weekly performances in 16 years, thanks to Beijing's most aggressive stimulus package since the pandemic, rolled out ahead of the Golden Week holidays. The CSI300 and Shanghai Composite indexes have surged by 15% and 12% for the week, marking their strongest performances since late 2008. Hong Kong's Hang Seng index also gained nearly 13%.

"The urgency of policy response is evident in the measures announced this week," Barclays analysts noted. "This could mean China is aiming to structurally repair its national balance sheet, with potential far-reaching effects on global assets," they added.

China's central bank announced a cut in the reserve requirement ratio by 50 basis points and a 20 basis points reduction in the borrowing cost of its seven-day reverse repurchase agreements. These moves are aimed at stabilizing the ailing economy. The CSI300 index and Shanghai Composite index saw increases of 3.8% and 2.1%, respectively.

Property shares in China extended their gains, jumping 7.8% following a pledge from the Politburo to stabilize the housing market. Ting Lu of Nomura believes Beijing could directly fund delayed residential projects. Consumer sentiment also soared, lifting consumer staple shares by 7.2% and shares of liquor giant Moutai by 4.7%. Hong Kong's Hang Seng index rose 3.5%, led by a 6.6% surge in tech shares.

Tech giants JD.com and Meituan saw their shares climb more than 10%. Reuters reported that China plans to issue special sovereign bonds worth approximately 2 trillion yuan ($284.43 billion) this year as part of a new fiscal stimulus.

Meanwhile, the Shanghai stock exchange acknowledged irregularities in stock auctions and announced an investigation into abnormal and slow transactions.

(With inputs from agencies.)