SHANGHAI (Reuters) – Stocks jumped and China’s government bonds rallied after the Politburo shifted its monetary policy stance to imply more easing is coming, mirroring moves made in previous crises.
Benchmark 10-year yields fell about 2 basis points to 1.935%, a record low. Hong Kong’s Hang Seng index jumped 2.8% and tech shares rose 4.3%.
China’s growth has stalled as a collapse in the property market has crushed confidence and consumption.
It will adopt a “moderately loose” monetary policy, according to an official readout from a meeting of top Communist Party officials, a shift from “prudent” and one it last made in 2010 to support a recovery from the global financial crisis.
China must also “vigorously” boost consumption and expand domestic demand “in all directions”, Xinhua reported, citing the Politburo – addressing an issue investors had focused on as necessary to improve China’s growth prospects.
“It gives high hope for more monetary support to come, including outright interest rate cuts,” said Frances (BCBA:BBARm) Cheung, head of Asia rates and currency strategy at OCBC in Singapore.
The Hang Seng index jumped above its 200-day moving average after the announcement, touching a one-month high, while mood-sensitive tech shares surged and there were sharp gainers in sectors from banking to property and consumer shares.
Chinese shares listed in Hong Kong rose 3.1%. The yuan was mostly steady at 7.2751 per dollar.
The rally in bond markets has been record-breaking this year and the moves pushed longer-end yields to new lows in anticipation of interest rate cuts. Ten-year yields are down about 70 basis points this year.
“It is expected to boost China’s economic growth next year as more fiscal and monetary policies will be rolled out,” said Ken Cheung, chief Asia currency strategist at Mizuho (NYSE:MFG) Bank in Hong Kong.
The Politburo meeting precedes the annual Central Economic Work Conference later this week, which sets key targets and policy intentions for next year.
