Goldman Sachs The Markets Does the China rally have legs?
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Oct 4, 2024 Lu Sun, Senior Asia macro strategist at Goldman Sachs, dives into the surprising rally of Chinese equities spurred by a broad stimulus package. He discusses how monetary easing and market interventions are intended to boost domestic growth amidst weak GDP figures. Sun evaluates potential obstacles the economy may still face, like the troubled property market, while highlighting the newfound enthusiasm from both foreign hedge funds and local investors. The conversation also touches on the implications of adding Chinese equities to U.S. investment portfolios amid geopolitical concerns.
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China's Stimulus Package
- China's stimulus package, driven by weak Q2 GDP data and a Fed rate cut, exceeded market expectations, particularly in monetary policy and property measures.
- The package signals a policy shift focused on stimulating growth, with further fiscal measures anticipated.
Need for Further Fiscal Stimulus
- While the stimulus offers a boost, particularly from monetary and property policies, more demand-side, fiscal measures are needed to truly address the underlying economic issues.
- Despite mortgage rate cuts, the property market remains challenged, requiring stronger fiscal intervention to fuel demand and drive significant recovery.
Market Rally and Local Interest
- The substantial market rally in Chinese stocks can be attributed to extensive short-covering, driven by the stimulus package.
- The renewed local interest and increasing brokerage account openings suggest continued momentum, although the initial rapid rally phase might be over.