China, Hong Kong stocks extend gains as massive stimulus boosts sentiment
Updates to market close
By Summer Zhen and Rae Wee
HONG KONG, Sept 25 (Reuters) -China and Hong Kong stocks extended their gains on Wednesday, although lost some steam in the afternoon trade, as investors continue to digest a wide-ranging stimulus package announced by Beijing the previous day.
China's blue-chip CSI300 Index .CSI300 jumped 1.5%, following a 4.3% rally in the prior session, while Hong Kong benchmark Hang Seng .HSI closed 0.7% higher, adding to Tuesday's 4.1% surge.
Beijing unveiled a slate of support measures on Tuesday - the biggest since the pandemic - including rate cuts, mortgage requirement easing, and fresh funding for equity purchases, in a bid to revive activity and stabilise the crisis-hit property market, though analysts noted the absence of any policies to support real economic activity.
Following the announcement, the People's Bank of China (PBOC) on Wednesday cut the rate of one-year medium-term lending facility (MLF) loans CNMLF1YRRP=PBOC to some financial institutions to 2.00% from 2.30%.
Analysts and investors note sentiment has picked up strongly given the size of the stimulus and attractive valuation of Chinese stocks, but the latest stimulus is not sufficient enough to turn around China's economy.
"Clearly this was more substantive than expectations and the market believes there could be more," said Joshua Crabb, head of Asia-Pacific equities at Robeco.
"Valuations have been cheap so any positive surprise could have an impact. Ongoing support will drive whether this continues," he said.
Goldman Sachs Chief China Strategist Kinger Lau China will likely remain as a "trade" until the housing issues are resolved, which is a "pain point" in the economy.
Real estate .CSI000006 and brokerage sectors .CSI399975 led the gains with a 2.8% and 2.1% jump, respectively.
In Hong Kong, Hang Seng Tech Index .HSTECH closed up merely 0.2%, after a more than 3% gain in the early trade. Mainland property stocks listed in Hong Kong .HSMPI edged down 0.08% at the close.
In short term, UBS expects the market could move higher given fiscal measures may be announced to improve demand between now and the ad-hoc Politburo meeting in end-October.
Meanwhile, China's yuan CNY=CFXS rose to a fresh 16-month high on Wednesday and briefly crossed the key 7-per-dollar level offshore, underpinned by investor optimism. It finished domestic session at 7.0218 per dollar.
Reporting by Summer Zhen and Rae Wee; Additional reporting by Gu Li; Editing by Shri Navaratnam, Kim Coghill and Sherry Jacob-Phillips
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