Second time lucky for the China bulls?
Another stimulus attempt from the Chinese government could be in the offing.
The government has slotted a media conference for Saturday for the country’s finance minister Lan Fo’An and advisers for Beijing at midday, Sydney time.
The news saw an immediate positive impact on share markets in Hong Kong and China – but that enthusiasm soon faded.
The Hang Seng Index in Hong Kong was up nearly 4% in the early afternoon Thursday, while the Shanghai market was up nearly 3%. The CSI 300 index was also up close to 3%.
The finance minister and his officials are expected to detail plans on fiscal stimulus to boost the economy, with what the notice said would be more forceful policies to revive growth.
The media function comes after a media briefing held by the country’s top economic planner on Tuesday disappointed investors. Officials refrained from announcing major new steps to get the shaky economy back on more stable footing.
The State Council Information Office said that the theme of the news conference is “intensifying countercyclical adjustment of fiscal policy to promote high-quality economic development.”
Western analysts are playing down this function after getting ahead of themselves about what would be revealed in Tuesday’s release.
But they do note the State Council notice mentions “fiscal policy” – some hope there will be a big figure mentioned somewhere in the statements to justify a second attempt this week to get markets running higher.
Being an announcement on Saturday, there will be no markets open anywhere, so the first reaction will be down to the ASX on Monday morning.
On Thursday afternoon, the People’s Bank of China followed up one of the pre-holiday measures – a fund to support liquidity among finance companies, funds and insurance companies.
The People’s Bank of China launched its 500 billion yuan (US$70.61 billion) swap facility. This allows eligible financial institutions to use assets as collateral to secure liquidity via a Securities, Funds, and Insurance Companies Swap Facility.
This facility allows eligible securities, fund and insurance companies in swapping their holdings of bonds, stock exchange-traded funds, and constituent stocks of the CSI 300 Index to use as collateral for high-liquidity assets like government bonds and central bank bills with the PBC, the statement reads.
The initial scale of the swap facility is set at 500 billion yuan, which may be expanded in the future based on demand and market developments.
As promising an idea as it is (and there is also a 300 billion yuan fund designed to help non-financial companies), the amounts are nowhere near enough to help the wider economy.