China’s Shanghai Composite Stock Index ($CHSC) rallied by more than +2% today to a 1-week high as market sentiment improved after this week’s Politburo meeting laid out a pre-growth tone that was more dovish than markets expected. The Chinese Communist Party’s 24-member Politburo, the country’s top decision-making body led by President Xi Jinping, promised “counter-cyclical” policies, which spurred a widespread rally from property stocks to tech and retailers.
The big question is whether the follow-through from government authorities' plans to boost growth will lead to a sustainable stock rally. Brief bursts of optimism previously sparked small gains in Chinese equities as the country emerged from strict Covid restrictions. However, stocks fell back as the recovery faltered after the markets were disappointed by a lack of forceful action taken by authorities to spur growth. Fidelity International said, “Clearly, markets have been disappointed as they anticipated more rapid improvements but are beginning to rationalize their growth expectations. Our view is that this somewhat unexciting period will eventually give way to a more positive market tone.”
