Chinese stocks rose as Beijing vows measures to boost weak economy

Chinese stocks soared Tuesday as Beijing pledged to ramp up measures to bolster China’s sputtering economy.

Hong Kong’s Hang Seng Index surged more than 3%, China’s tech-heavy ChiNext rose 1.8% and the Shanghai Composite Index increased 1.81% on Tuesday morning in Asia.

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Chinese property developers Country Garden and Longfor soared 14.3% and 20.7% respectively. Sunac rose 12.5%, China Vanke was up 11.02% and China Overseas Land and Investment grew 11.39%.

A day earlier, Chinese real estate stocks tumbled on renewed debt fears. The Chinese government cracked down on the property sector’s debt levels in August 2020.

The stock rebound comes after China’s top leaders pledged on Monday to ramp up policy support to boost domestic consumption as the post Covid rebound has been slower than expected.

According to official data, China’s gross domestic product in the second quarter increased 6.3% from a year ago, performing worse than the 7.3% economist predicted. This was a 0.8% growth from the first quarter, and was slower than the 2.2% quarter-on-quarter pace recorded in the January to March period.

China’s top leaders met Monday for the much-anticipated Politburo meeting and hinted at moves to “adjust and optimize” property policy in what the leadership called a “torturous” economic recovery.

State news agency Xinhua quoted the 24-member Politburo as saying “the economy is facing new difficulties and challenges.” That’s mainly due to weak domestic demand, operational challenges for companies as well as “a grim and complex external environment,” it said.

“The meeting emphasized that it is necessary to actively expand domestic demand, give full play to the basic role of consumption in driving economic growth, expand consumption by increasing residents’ income,” according to Xinhua.

“It is necessary to boost the consumption of automobiles, electronic products, and home furnishing, and promote the consumption of services such as sports, leisure, and cultural tourism,” said the report.

Hong Kong-listed shares of internet giants rose on Tuesday. Alibaba shares soared 4.7%, while Tencent was up nearly 4%. Meituan and Baidu shares were higher by 5.7% and 6.8% respectively.

In the electric vehicle space, Xpeng soared 11%, Li Auto was up 4.15% and BYD rose 2%.

“This is a reconfirmation that the [Chinese] policymakers have heard the market concern on more support needed for the domestic economy,” said Xiaolin Chen, head of international at KraneShares, on CNBC’s “Street Signs Asia” Tuesday.

“They want to achieve the 5% GDP target of this year. The first job they need to do is to create jobs for the the labor force in China,” said Chen.

“I do certainly see some encouraging language released from the statement that removed a lot of the concerns of people having a high focus on real estate market, employment, private investment, and so on. So far, the language has been encouraging.”