Happy PRC National Day to any readers who celebrate it.
Summary of today’s top items:
1.
This sharp rally is happening before we have details of any additional fiscal stimulus. From last week’s Politburo readout (full translation) it sounds like something more is coming on the fiscal side, but we may need to wait several more weeks, as Caixin noted in its latest cover story:
Unlike monetary policies, expanding fiscal measures like issuance of government bonds and special bonds, requires approval from the National People’s Congress. So all eyes will be on the upcoming session of the NPC Standing Committee in late October, which may provide a crucial window for greenlighting any new fiscal initiatives.
Two weeks ago on Sharp China we discussed the likelihood of policy moves ahead of the National Day Holiday to improve sentiment, and the possibility of an explosive rally into the holiday. The key segments:
It feels a bit like 2014, when the market more than doubled in 8 months before crashing. I understand why there is skepticism about the current explosive rally, and reminders that Japan had several big bear market rallies over the decades, but good luck to investors who try to short this surge any time soon; FOMO + PBoC printing presses + people who have not been able to make money since COVID suddenly finding animal spirits turned back on are hard to fight. Hong Kong markets will reopen later this week, the mainland markets are closed until October 8.
2. More moves to stabilize the property market – There were more official announcements over the weekend designed to stabilize the real estate market, with requirements to reduce mortgage rates, lower minimum down payments, and more funding for support for local SOEs to “acquire completed yet unsold commercial housing at reasonable prices for use as affordable housing”. Guangzhou became the first tier one city to remove all housing purchase restrictions. Shanghai, Shenzhen and Beijing also relaxed some restrictions, but those adjustments were relatively disappointing compared to Guangzhou’s. Perhaps these moves will stabilize the real estate market, but they will not likely spark much of a rebound in prices, at least until more people take profits in the stock market and plow some of the gains back into real estate.