Friday’s disappointing GDP report did goad China’s government to action to support the stock market and the economy, as I wrote that it would in my Friday post.
Words from Chinese President Xi Jinping helped continue the surge in Chinese stock prices off a 4-year low. Over the weekend President Xi vowed “unwavering” support for private companies in China.
Those words were followed by yuan from the central government. China’s stock exchanges committed to helping manage margin risk and the government announced a plan to cut personal income taxes in order to spur economic growth. On Monday the Site Council announced it would support bond financing offers by private companies and the People’s Bank said it would provide funding for that effort without providing any details about the size of that support or its timing. The People’s Bank did put numbers to a plan to increase its relenting and rediscounting quota in order to supply banks with more money to lend–$22 billion (150 billion yuan) was the figure.
That flurry of government activity sent the Shanghai Composite up another 4.1% on Monday after a 2.6% gain on Friday. Big caps traded in New York soared. China Southern Airlines (ZNH), was up 5.92% as of 2 p.m. New York time Monday. Tencent Holding (TCEHY) was ahead 3.8%. Alibaba (BABA) had climbed 3.8%.
I doubt that this is the final set of government moves. This recent bout of action is likely to give the Shanghai market a short-term bounce but more will be needed in the way of support given continued worries about the U.S-China trade war and a slowing global economy. On recent action, though, I’d expect Beijing to provide that support when the market looks to be faltering again.
