China Stocks Survive: Best Week in 16 Years with Aggressive Stimulus

China's stock market experienced its best week in 16 years, spurred by an aggressive stimulus package ahead of the Golden Week holidays. The CSI300 and Shanghai Composite indexes surged, buoyed by measures to stabilize the housing market and promises of special sovereign bonds. Industrial profits, however, remain shaky.

China's stock market logged its best week in 16 years on Friday, propelled by Beijing's most aggressive stimulus package since the pandemic. This move comes just ahead of the Golden Week holidays.

The blue-chip CSI300 and benchmark Shanghai Composite indexes saw weekly gains of roughly 16% and 13%, their biggest jump since 2008. Hong Kong's Hang Seng index added 13% as well. According to Barclays analysts, the measures introduced this week indicate a significant shift in policy urgency, offering more than mere minimum intervention.

On Friday, China's central bank announced a reduction in the reserve requirement ratio for all banks by 50 basis points and lowered the borrowing cost of its seven-day reverse repurchase agreements by 20 basis points. This is part of broader efforts initiated on Tuesday to stabilize the economy.

New data revealed a sharp contraction in industrial profits for August. For the day, the CSI300 and SSEC saw rises of 4.5% and 2.9%, respectively. Property shares surged over 8% following a September Politburo pledge to stabilize the housing market, with Shanghai and Shenzhen planning to lift key home purchase restrictions.

Key consumer staple shares, including liquor giant Moutai, jumped 7.5%, led by a 6.6% rise in Moutai shares. Hong Kong's HSI gained 3.6%, with technology shares surging 5.8%. Both JD.com and Meituan shares rose more than 8%.

However, technical glitches on the Shanghai Stock Exchange hindered some investors' ability to complete their orders. Reuters reported that China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) as part of additional fiscal stimulus. Treasury futures for December 2024 delivery fell 2.6% by market close.

(With inputs from agencies.)