Goldman, BlackRock chime in as Chinese stocks shed unloved tag in US$4.5 trillion rally

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Chinese stocks go from unloved during the pandemic to ‘attractive’ and ‘compelling’ after Beijing’s surprise stimulus bazooka

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Chinese stocks have regained US$4.5 trillion of capitalisation in Shanghai, Shenzhen, Hong Kong and New York since Beijing’s surprise stimulus on September 24. Photo: Reuters

Zhang Shidongin Shanghai

Published: 11:41am, 23 Oct 2024Updated: 11:42am, 23 Oct 2024

Unloved for years since the Covid-19 pandemic ended in late 2022, Chinese stocks are being hailed as “attractive” and “compelling” bets even after a US$4.5 trillion rally in Shanghai, Shenzhen, Hong Kong and New York over the past one month.

China put a floor under stock and home prices on September 24, when it delivered a surprise stimulus package to stop the rot in both markets. Since then, the CSI 300 Index of onshore stocks has risen 23 per cent, while the Hang Seng Index surged 12 per cent. The Nasdaq Golden Dragon Index has advanced 18 per cent. The bull run may hasten bigger fund inflows, Goldman Sachs said.

At risk is Beijing’s policy credibility, according to UK fund manager Abrdn. A lack of details on what goodies might be coming could sour the narrative, BlackRock said. The onus is on the standing committee of China’s legislature to live up to heightened expectations when it meets later this month or next month.

06:57

Boom or bust: how sustainable is China’s stock frenzy?

Here are some takeaways on the outlook for Chinese stocks by some global fund managers and investment banks.

BlackRock: China is the latest example of how cheap valuations can turn into a stock market rally once a catalyst emerges, the New York-based money manager said in a report. China’s stimulus signal prompted the firm to go “modestly overweight” especially given depressed valuations.

“Chinese shares have surged since the September Politburo meeting on hopes that major fiscal stimulus may be on the way,” strategists at BlackRock Institute led by Wei Li wrote on October 14. “A lack of details so far has disappointed some investors, so we eye policy announcements for more clarity.

“Details have been scant, so we could change our view if future announcements disappoint. We still think China faces long-term, structural challenges, like economic and geopolitical competition with the West, government debt and population ageing.”