Chinese Stocks End Higher Amid Positive Sentiment

The Chinese stock market closed higher on Friday, driven by positive sentiment and government policy support. The Shanghai Composite Index gained 0.8% to 3,450.56, while the Shenzhen Composite Index rose 1.1% to 2,483.33. The Hang Seng Index in Hong Kong also climbed 0.9% to 24,784.48.

Market sentiment has been buoyed by recent government policies and announcements. The Chinese government has been implementing a series of measures to support the economy, including monetary stimulus, a mortgage-rate cut for existing home loans, and the creation of new monetary-policy tools to support the stock market. These policies have been well-received by investors, leading to a significant rally in the market.

The Politburo meeting on September 26, 2024, emphasized stabilizing the property market and reviving the economy, further boosting market sentiment. The market's overreaction to the stimulus measures, as evidenced by the sudden reversal in market liquidity and sentiment, highlights the impact of economic indicators and policy announcements on market performance.

The market's rally has been broad-based, with select consumer-staples, financial-services, real-estate, semiconductor, and software industries posting strong performance. These sectors have aligned with the areas highlighted in the stimulus policies or have benefited from significant improvement in market liquidity and investor confidence. For instance, the semiconductor and software industries have shown strong performance, indicating that they are sensitive to changes in investor sentiment.



High-volatility and liquid stocks have also benefited from the near-term shift in market liquidity and sentiment. In the offshore market, the beta, short-term reversal, and liquidity factors had the strongest positive returns, while in the onshore market, beta, size, and residual-volatility factors posted the strongest positive returns. This suggests that higher-volatility and more-liquid stocks are more responsive to changes in investor sentiment.

Looking ahead, investors can expect more supportive policies and broadening consumption in 2025. Continuous monetary and fiscal easing policies are expected, including gradual policy rate cuts and RRR reductions. Market anticipated that the fiscal deficit could increase from 3% to 4% of GDP, a significant change from the past. Consumption support is broadening, not only during festive seasons or for particular industries, but also for various sectors and products.

In conclusion, the Chinese stock market ended higher on Friday, driven by positive sentiment and government policy support. The market's rally has been broad-based, with select industries and high-volatility stocks performing well. Looking ahead, investors can expect more supportive policies and broadening consumption in 2025.