Chinese stocks post biggest single-day rally since 2008 on stimulus boost

Beijing last week announced its most aggressive stimulus measures since the pandemic, ranging from large rate cuts to fiscal support

China's CSI300 blue-chip index is now up nearly 30 per cent from its February low. Bloomberg

Chinese stocks swept to their biggest single-day gains in 16 years on Monday, with domestic A-shares registering their highest turnover yet, as investors rushed to join a rally sparked by Beijing's latest stimulus measures.

The CSI300 blue-chip index is now up nearly 30 per cent from its February low, which by some market definitions suggests it is in a bull market, but much of the gains have happened very quickly over a few sessions since last week.

Many traders, fearing they may miss out of the upsurge ahead of a week-long holiday starting on Tuesday, helped lift the CSI300 index 8.5 per cent at the close, taking its five-day gain to over 25 per cent, the strongest on record.

The broader Shanghai Composite Index, meanwhile, recorded a total turnover of 1.17 trillion yuan ($166.84 billion) and surged 8.1 per cent. That took its five-day gains since last Tuesday, when Beijing began rolling out stimulus measures to arrest a slowdown in the broader economy, to 21.4 per cent, the strongest since 1996.

It was also the best single-day percentage gain for both the CSI and SSEC indexes since 2008.

Similarly, the smaller Shenzhen index soared 11 per cent and recorded a turnover of 1.4 trillion yuan.

The rally in Chinese stocks has come on the back of last week's most aggressive stimulus measures announced by Beijing since the pandemic – ranging from rate cuts to fiscal support – in an attempt to shore up its ailing economy.

Particularly in a boost for stocks, the People's Bank of China's also introduced props for the capital market, one of which includes a swap programme allowing funds, insurers and brokers easier access to funding in order to buy stocks.

That lit a fire under beaten-down Chinese equities that had been languishing near multiyear lows as recently as early this month, as investors fretted over China's growth prospects.

“It's really a big turnaround, the policies are so intensive, we have never seen such clear instruction to stop housing prices declining and support the stock market,” said Dickie Wong, executive director of research at Kingston Securities.

“Many foreign investors are afraid of missing out, local retail investors are asking me what they should add to, institutional investors are rushing to the market to catch up, and the large inflows have pushed the Hang Seng index up to 21,000.”

Hong Kong's Hang Seng index, which advanced 2.4 per cent on Monday, is now up roughly 24 per cent for the year, dethroning Taiwan to become Asia's best performing stock market.

Adding to the strong momentum was news on Sunday from China's central bank saying that it would tell banks to lower mortgage rates for existing home loans before October 31, as part of policies to support the country's property market.

Guangzhou city also announced the same day the end of all restrictions on home purchases, while Shanghai and Shenzhen eased curbs on buying.

That catapulted shares of property companies on Monday, with mainland-listed property stocks advancing 8.2 per cent, while the Hang Seng Mainland Properties Index charged 6.4 per cent higher.

Investor optimism the latest measures could help revive China's weak domestic consumption also lifted shares of consumer staples up 8.8 per cent, its biggest daily percentage gain in 16 years.

For the month, the CSI300 index clocked a gain of 21 per cent, its best performance since December 2014. The Shanghai Composite Index similarly ended September with a 17 per cent increase, its most since April 2015.

The Hang Seng index had its best month since November 2022 with a 17 per cent rise, after delivering its biggest weekly rise since 1998 last week, and fifth largest in the last half-century.

Mainland financial markets will be closed October 1-7 for National Day holidays.