China’s stocks rebound from 5-year low as trading resumes after holiday

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Chinese stocks rebound from their lowest levels in more than five years as investors await a rate decision from the US Federal Reserve

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A street scene in Shanghai. Photo: Bloomberg

Zhang Shidongin Shanghai

Published: 10:29am, 18 Sep 2024Updated: 3:18pm, 18 Sep 2024

Chinese stocks rebounded from their lowest levels in more than five years after a holiday break, as investors eagerly awaited a rate decision from the US Federal Reserve.

Hong Kong’s market is closed for a public holiday and will resume trading on Thursday.

The CSI 300 Index added 0.4 per cent to 3,171.01 at the close. On Friday, it closed at its lowest point since January 24, 2019. The Shanghai Composite Index gained 0.5 per cent and the Shenzhen Composite Index retreated 0.2 per cent. Mainland markets have yet to catch up to the Hang Seng Index, which rose 1.7 per cent over the first two days of trading this week.

Caution prevailed ahead of the Fed’s rate decision on Thursday and Chinese traders digested some key economic data for August that fell short of expectations. Industrial output and retail sales both missed expectations, while home-price declines deepened, according to data released by the statistics bureau over the weekend. A Fed rate cut could lift China’s stocks and economy, as it would reduce the interest-rate spread between the two nations and leave the People’s Bank of China more room for policy easing.

The probability of a 50-basis-point cut is now 65 per cent and that of a quarter-point reduction is 35 per cent, according to the data compiled by CME Group.

“A Fed cut will bolster sentiment on Chinese stocks in the short term,” said Wu Xinkun, an analyst at Haitong Securities in Shanghai. “For the long run, investors will still need to closely watch the change of the fundamentals of the Chinese economy for the sustainable catalyst.”