China Stocks Rally After Data Miss Strengthens Case for Stimulus

(Bloomberg) -- China’s stocks rose, as traders speculated Beijing will consider more measures to support the economy after data showed weaker-than-expected growth in April.

The CSI 300 Index jumped 2.3% at the close, though volume in the gauge was about 35% lower than the 30-day average at this time of day, signaling little conviction in the gains. The offshore yuan was little changed after briefly strengthening past the 6.9 per dollar level Wednesday. Government bonds were also little changed.

Reports on industrial output, retail sales and investment released Wednesday were all worse than economists had forecast. Faltering credit and consumption at home coupled with a weaker global economy means China is running out of steady growth engines right when it needs them.

“More stimulus will come but there will be a lag before that shows up in the hard data,” said Nader Naeimi, head of dynamic markets at AMP Capital Investors Ltd. “Things will get worse, and markets will probably go lower, before getting better.”

China Stocks Rally After Data Miss Strengthens Case for Stimulus

Despite Wednesday’s rebound, China’s financial markets remain under pressure after trade talks with the U.S. unexpectedly turned sour in May. The recent rout had wiped out more than $1 trillion in value from stocks, triggering the bull market’s first 10% correction and prompting foreign investors to sell at a record pace. Yuan traders are eyeing the 7 per dollar level even as the Trump administration signaled more optimism around a deal.

In Hong Kong, the Hang Seng China Enterprises Index climbed 0.6% as of 4 p.m. local time, paring an earlier advance of 1.3%. The city’s benchmark gauge rose 0.7%, helped by Tencent Holdings Ltd.’s 1.2% advance ahead of its earnings release later on Wednesday.

Heavyweight Kweichow Moutai Co. was the biggest contributor to the Shanghai Composite Index’s advance, while consumer and health-care companies led gains on the CSI 300 Index.

“With this data, on top of the trade concern, we can now be even more assured that policy support is on the way,” said Wu Xianfeng, fund manager at Shenzhen Longteng Asset Management Co.

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