HONG KONG (AFP) – An early rally in Hong Kong and Shanghai stocks evaporated yesterday with traders tempering initial excitement about China’s pledge to adopt a looser monetary policy as they awaited more details about the plan.
Seoul, however, held on to gains after a healthy rebound that followed days of losses fuelled by the brief declaration of martial law by South Korea’s president.
In the latest bid to kickstart growth, Chinese President Xi Jinping and other top leaders announced their first major shift in policy for more than a decade, saying they would “implement a more active fiscal policy and an appropriately relaxed” strategy.
The remarks, reported by state news agency Xinhua on Monday, represented a move away from their previous “prudent” approach, sparking hopes for more rate cuts and the freeing-up of more cash for lending.
He said yesterday China had full confidence it would hit its annual economic growth target this year and warned that “there will be no winners” in a trade war between Beijing and Washington.
Monday’s announcement came as Beijing contemplates Donald Trump’s second term in the White House. The president-elect has indicated he will reignite his hardball trade policies, fuelling fears of another standoff between the superpowers.
Leaders have battled for almost two years to kickstart the world’s number two economy, which has been battered by weak domestic consumption and a debilitating property sector crisis.
Data yesterday showing November exports grew less than forecast and imports unexpectedly fell reinforced the need for more help for the economy.
“Beijing kept its stimulus measures very modest in 2024, because the goal was to stabilise the economy and rehabilitate confidence. And as a result, China reserved its firepower for an uncertain 2025,” managing director Shehzad Qazi of consultancy China Beige Book, said in a commentary.
“Now, Beijing is almost singularly focused on protecting China from the onslaught of forthcoming Trump tariffs.”
Hong Kong stocks surged more than three per cent at yesterday’s open, extending a rally of 2.8 per cent on Monday. Shanghai, which had closed before the news, gained more than two per cent in early trade.
However, Hong Kong ended down and Shanghai gave up most of its gains by the end of the day, with analysts remaining cautious after a string of previous announcements fell short of expectations or lacked detail.
“Monetary stimulus will only work if Beijing lifts broader business and household confidence. This puts a lot of focus on fiscal policy for 2025,” Qazi said.