By South China Morning Post | Created at 2025-01-06 09:36:47 | Updated at 2025-01-07 20:27:09
1 day ago
China should learn from history and rely more on fiscal measures than rate cuts to spur stock market gains, according to Goldman Sachs, which raised its target for Chinese equities in November.
Fiscal policy, including government expenditures and demand-side measures, has historically had a stronger impact on Chinese equity returns than monetary easing, according to a report by the US investment bank.
The trend has held true since 2016, the bank said, citing correlations between policies like the reopening measures after the Covid-19 pandemic and stimulus packages that spurred stock rallies.
Since late September, China has introduced a slew of measures to boost the sluggish economy, including lowering thresholds for property purchases, swapping local government debt and subsidising consumption. These triggered a stock market rally, with the CSI 300 Index of the largest onshore stocks jumping 21 per cent in September – the biggest monthly gain in almost a decade.
The MSCI China Index of 581 onshore and offshore Chinese stocks surged to 76 from 58 in early October and edged back to about 63 on Monday.
“Much of the market volatility in the past few months can be attributed to investor expectation changes regarding the timing, scale and specificity of the anticipated fiscal stimulus announcements in various policy meetings,” said the report, released on Monday.
