The news here yesterday came after the domestic session closed but the Hang Seng index managed to capitalize and rally to produce gains of over 2%. It was largely expected that the hope would carry on to this day but the music of the feelings has not turned out like that at all. That's despite domestic indices closing higher today. It doesn't tell the whole story.
The Shanghai Composite and CSI 300 indexes closed up 0.6% and 0.7% respectively. However, they closed at lows for the day with the latter falling back below 4,000 and returning to the post-October range. As for the Hang Seng, it opened with a gap up of more than 3% but closed the day with a loss of 0.5%. Ouch.
As the dust begins to settle from the latest announcement by Beijing, investors still hold doubts. Personally, I do not doubt China's commitment and ability to deliver on monetary policy. They have already graduated this year and that can reasonably be expected to continue next year. The change in policy stance only serves to reinforce that sentiment.
The only thing I doubt is China's ability to deliver on the fiscal side of things. They have been saying they will do more for over two years now. And yet every time when Beijing should be making a strong commitment, they tend to waver. Just like they did back then here in November at the latest.
If Beijing wants to reaffirm investors' faith, it will have to deliver something at some point next year. Otherwise, the most recent rise in sentiment since October may soon fall. That's especially with China's economic data still not towards the end of this year.
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