Chinese Firms See Gains Amid Stimulus Measures

By Lisa Pauline Mattackal and Purvi Agarwal

(Reuters) – U.S.-listed shares of Chinese firms and China-focused funds surged on Friday, anticipating more strong gains due to aggressive stimulus measures aimed at boosting economic growth in China, the world’s second-largest economy.

The People’s Bank of China (PBOC) has cut interest rates and reduced required bank reserves by 50 basis points. Reports indicate that cities including Shanghai and Shenzhen plan to lift key home purchase restrictions in the coming weeks, with additional fiscal measures expected to follow.

Chinese e-commerce giants’ U.S. listings saw significant rises: Alibaba (NYSE:BABA) increased by 3.1%, JD (NASDAQ:JD) rose by 3.9%, and PDD Holdings gained 5.8%.

Nio (NYSE:NIO), a Chinese electric vehicle manufacturer, climbed by 6.2%, while gaming company Bilibili (NASDAQ:BILI) increased by 5.4%, and search engine giant Baidu (NASDAQ:BIDU) jumped by 4%.

Exchange-traded funds tracking the China market experienced a boost, with domestic stocks achieving their best week since 2008. The iShares MSCI China ETF rose 1.6%, marking its highest point since February 2023, and the tech-focused KraneShares CSI China Internet ETF increased by nearly 4%.

If these gains persist, the MCHI fund could record nearly a 20% increase this week—the best since its launch in 2011—while the KWEB is on track for a rise over 26%, marking its largest weekly gain in over two years.

Joe Saluzzi, co-head of equity trading at Themis Trading, suggested that short-covering may be contributing to the gains, as traders betting on stock declines are buying shares to cover their positions.

Nevertheless, many analysts remain skeptical about whether the stimulus measures are adequate to rekindle interest in China, which is facing deflationary pressures, weak consumer demand, and a significant downturn in the property market.

Analysts at BCA Research commented that while Chinese equities and other pro-cyclical assets may see further tactical gains, the long-term implications for the economy are still uncertain.

Shares rallied on Tuesday following the PBOC’s largest easing measures since the pandemic, but retreated on Wednesday as investors questioned their sufficiency. However, recent pledges from policymakers for necessary fiscal stimulus to meet this year’s targeted growth of 5% seemed to mitigate some concerns.