Chinese stocks marked their second consecutive day of gains, driven by Beijing’s stimulus measures. While immediate gains are positive for companies like Alibaba, there’s still uncertainty about China’s long-term economic outlook.
Shares of e-commerce giant Alibaba (ticker: BABA), listed in the U.S., climbed 0.7% in premarket trading on Tuesday, following a 2.7% increase the previous day. Similar trends were observed for JD.com (JD), rising 1.2% premarket after a 2.6% surge on Monday, and electric car maker Nio (NIO), with a 1.4% premarket boost after a 1.8% rise earlier.
These positive movements among major Chinese tech companies reflect a bright trading day in Asia. Hong Kong’s Hang Seng Index gained 2%, the Shanghai Composite surged 1.2%, and Tokyo’s Nikkei 225 edged 0.2% into positive territory.
The recent two-day upswing in China’s stock market can be largely attributed to stimulus actions from Beijing. The Chinese government announced plans to cut the stamp duty on securities transactions by half, reducing it from 0.1% to 0.05%—the first such reduction since 2008. These steps aim to invigorate capital markets.
“Currently, this added support has bolstered investor sentiment. However, doubts persist regarding China’s economic stability,” explained Susannah Streeter, an analyst at Hargreaves Lansdown brokerage.
While Beijing’s recent actions indicate short-term stock market stimulation, questions remain about long-term strategies for strengthening the world’s second-largest economy. China’s economic slowdown has caused global market concerns and impacted widely held stocks.
Despite some introduced stimulus measures and promises of more to come, investors remain skeptical about whether these efforts will be sufficient to counteract dwindling growth and challenges within the property sector, which pose risks to the broader financial system.
For companies like Alibaba and JD.com—whose fortunes are closely tied to the Chinese consumer’s health—more substantial and sustained stimulus (if it comes) will likely be necessary to translate into enduring stock gains.
Nevertheless, the immediate positive impact on stocks is still a cause for investor celebration.
(Source: Barron’s)
