Chinese equities moved sharply higher last week, responding to a series of policy announcements after months of pressure on authorities in Beijing. Having only seen piecemeal measures so far this year to shore up economic confidence, Beijing announced some much more significant steps. The first of which was monetary policy. This was followed days later by promises of fiscal support, many of which specifically targeting the equity market. Finally, later in the week China’s Politburo said it will extend more support to prevent further declines in the housing sector, which is the first time policymakers have explicitly targeted the property market. On the week, the Shanghai Composite Index rose nearly 13%, whilst other indices across Asia including Japan’s Nikkei 225 also rose on the news, notably outpacing other developed markets which were far more muted.

Having also recently seen an interest rate cut at the Federal Reserve, the People’s Bank of China added to a growing list of central banks to trim policy rates last week. Those included the Swiss National Bank, Sweden’s Riksbank, the Bank of Mexico, the Czech National Bank as well as the Hungarian National Bank, all of which opted for a 25 basis point cut whilst the Reserve Bank of Australia left rates unchanged.

In the US, The Dow Jones Industrial Average and the S&P 500 index again moved to record highs during the week before edging lower to close the week with modest gains in local currency. Materials stocks with copper and chemicals exposure were particularly strong on hopes for a rebound in Chinese demand. The copper price rose above $10,000 a tonne on Thursday on the back of the new China stimulus measures. Technology stocks also outperformed on reports of a possible takeover of Intel and news that Nvidia’s CEO was no longer selling down his own shareholding in the company.  

Elsewhere in local currency terms, the MSCI Europe ex UK index rebounded and closed the week 2.87% higher amid hopes for further interest rate cuts and increased demand from China, whilst the UK’s FTSE 100 also closed the week modestly higher.

Week Ahead

Source: Refinitiv Workspace, 30/09/24

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