China Stocks Rally to 3-Week High, Though Euphoria May Be Brief

(Bloomberg) -- Chinese stocks surged to the highest since Dec. 19, lifted by signals Beijing plans to stimulate consumption and on hopes a trade deal will be reached with the U.S. But investors need more than a couple of decent days for encouragement after last year’s battering.

Car companies and home appliance makers led the charge, with Great Wall Motor Co. top of the pile on the CSI 300 Index as it surged by the 10 percent daily trading limit. Geely Automobile Holdings Ltd. was the best performer on Hong Kong’s Hang Seng Index, climbing as much as 11 percent, its biggest jump in two months. Qingdao Haier Co. and Midea Group Co. both advanced more than 5.5 percent in Shanghai and Shenzhen.

China Stocks Rally to 3-Week High, Though Euphoria May Be Brief

The rally came after Ning Jizhe, vice chairman of China’s state planner, told television channel CCTV that the government will help boost buying of cars and household appliances. The push to lift consumption is set against the backdrop of a slowing Chinese economy and a trade dispute with the U.S.

“Today’s rally is a little bit overdone,” said Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd. “The government has only made some guideline comments on support for auto and home appliance industries, and it remains uncertain what and when they would announce concrete measures. If there is no concrete policy, the rally we’ve seen won’t last long.”

With three days of talks between Chinese and American officials drawing to a close, there’s some optimism that Washington and Beijing can come to an agreement on trade. Donald Trump is said to be increasingly eager to strike a deal in the hope it will give sagging financial markets a boost. The spat was a big drag on Chinese assets last year, with $2.4 trillion wiped from the country’s stock market.

China Aims to Stimulate Car Sales to Reverse Historic Slump

“The trade concern is easing, but high-level agreement hasn’t been reached,” Leung said, adding that it would be best to wait until the end of this month or early February for a clearer picture. “China’s economy is still slowing and the stimulus measures are uncertain, so I think the market will keep range-bound.”

The CSI 300 Index, which slumped 25 percent in 2018, ended Wednesday up 1 percent, taking its advance this year to 2.3 percent. The ChiNext gauge of small companies and tech stocks erased an earlier gain to close down 0.1 percent. In Hong Kong, the Hang Seng Index powered 2.3 percent higher, extending a rebound from its worst first trading day of a year since 1995.

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