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China’s Politburo mentioned these two words for the first time in more than a decade. Stocks soared.
Chinese stocks surged in late Hong Kong trade on Monday in the latest government announcement promising action to boost its stuttering economy.
Down as much as 0.9% earlier in the session, the Hang Seng HK:HSI finished with a flurry, rising 2.8%. The announcement was timed after the local market close, as the Shanghai Composite CN:SHCOMP ended slightly lower.
Hong Kong-listed stocks including JD.com HK:9618 JD and Alibaba HK:9988 BABA joined a broad-based market rally.
Crude-oil futures CL00 extended gains after the announcement.
A statement from the Chinese Politburo said it will “implement more proactive fiscal policies and moderately loose monetary policies, enrich and improve the policy toolbox, [and] strengthen extraordinary counter-cyclical adjustments,” according to an English translation.
Analysts at Societe Generale say that’s the first mention of “moderately loose” with regard to central-bank policy since 2011. The use of “extraordinary” is new, they added.
The mention that both the housing and stock market should be stabilized is an indication of “high-level recognition of the importance of wealth effects,” the analysts said.
The government still has been coy about what it will do next year, as the economy not only confronts a struggling domestic property market but possibly a new series of tariffs under President-elect Donald Trump.
So far there’s been a series of rate cuts and a local government debt swap, among other steps China’s government has done to shore its economy.
Analysts at Goldman Sachs forecast a fiscal deficit of 1.8% of GDP, 40 basis points of monetary policy easing and more easing measures for the property sector next year.
Over the last three months, the iShares MSCI China ETF MCHI has rallied 17%, vs. a 13% gain for the S&P 500 SPX over the same timeframe.