September 24, 2024, is a turning point for stocks based in China. Although its economic prospects remain highly troublesome, the monetary and fiscal policies should buoy the stock market.
On Oct. 20, 2024, China cut its lending rate for the one-year and five-year terms. The one-year LPR falls by 25 bps to 3.10%. The five-year LPR, which its mortgage rate is based upon, falls to 3.60% from 3.85%. Those cuts are on top of a 0.5% cut to its reserve requirement ratio last month. The People’s Bank of China’s seven-day reverse repurchase rate also fell to 1.5% from 1.7%.
In response to the policies, Alibaba (BABA) traded above $115, PDD Holdings (PDD) at over $155, and JD as high as $47.82. By last week, the share price gave up a significant amount of the rally. Speculators are not convinced that lower mortgage rates will revive China’s real estate market.
The Chinese people will not likely buy a second home at lower rates. They are facing a lost decade after re-opening from the pandemic lockdown. Foreign firms are moving their manufacturing out of China. The U.S. and China trade war also worsens China’s prospects.
Finally, the upcoming U.S. election outcome may lead to worsening trade wars.
Expect more brief rallies and sell-offs that follow. China’s slump may continue unless its economy recovers.
