For the second time in six weeks, officials in Beijing managed to engineer a rally in both Mainland and Hong Kong shares with promises to support markets and the economy.
Sentiment turned bleak this month and volatility in the currency added to market angst. An inflexible approach to combatting local COVID outbreaks exacerbated investor consternation.
Allusions to additional stimulus bolstered markets in the lead up to Friday’s pre-holiday session, when the Politburo doubled down on familiar rhetoric. Policymakers will “waste no time in developing more tools,” a meeting readout carried by state television read. The leadership will “strive to achieve” China’s full-year growth targets and “respond positively” to companies’ desire for a more predictable operating environment.
As usual, the readout was long on promises (and just long in general) and short on specifics. Almost without exception, these pronouncements read like manifestos. The word “necessary” came up nearly two-dozen times. Below is a list of things the Politburo deemed “necessary” on Friday:
- Fully expand domestic demand
- Strengthen land, energy, environmental assessment and other guarantees, and comprehensively strengthen infrastructure construction
- Pay full attention to the leading role of consumption in the economic cycle
- Stabilize market players and implement a package of relief and assistance policies for industries, small, medium and micro severely hit by the epidemic
- Do a good job in ensuring the supply of energy resources, stabilizing prices and preparing for spring ploughing.
- Effectively guarantee and improve people’s livelihoods, stabilize and expand employment, organize the supply of important commodities, ensure the operation of core urban functions and maintain overall social stability
- Ensure smooth transportation and logistics, and the normal operation of key industrial chain supply chains
- Effectively prevent systemic risks
- Adhere to the position that houses are for living in, not for speculation
- Respond to market concerns in a timely manner
- Steadily advance the reform of the stock issuance registration system, actively introduce long-term investors and maintain the stable operation of the capital market
- Promote the healthy development of the platform economy
- Complete the special rectification of the platform economy, implement normalized supervision and introduce specific measures to support its standardized and healthy development
That’s hardly exhaustive. The CCTV readout identified at least a dozen more policy priorities, before closing on an abrupt note: “The meeting also studied other matters.”
The above is far too nebulous to be meaningful. Essentially, Beijing rereleased a list of economic and social objectives, emphasized how critical they (all) are and pledged to address (all of) them.
Nobody doubts their sincerity. And really, no one questions their capacity to address the issues either, with the caveat that Xi’s methods aren’t always what outside observers might describe as ideal.
The problem, rather, is that most of the issues mentioned in the list (above) aren’t really “issues.” They’re long-term projects. It’s not obvious why anyone should pile into Chinese equities today just because the Party still plans to foster a prosperous society tomorrow.
But policymakers clearly recognized the utility of saying something to stanch the bleeding in local assets. CCTV covered the readout in the middle of the day. That’s unusual. Typically, Politburo meetings are summarized later, on the evening news. Mainland shares jumped again. The CSI 300 rose a third day (figure below).
The surge came just days after the benchmark suffered its worst single-session decline since the re-opening following 2020’s extended Lunar New Year break, when China was battling the first wave of COVID.
Mainland shares actually managed to log a weekly gain thanks to Friday’s rally, no small feat considering how dire the situation seemed just a few days ago.
In Hong Kong, Friday’s surge was even more impressive. H-shares jumped more than 5% (figure below).
The Hang Seng Tech Index, the poster child for Xi’s regulatory crackdown, rose 10% in the best day since last month’s verbal intervention, which sparked a 21% rally in the gauge.
None of this addresses the main worry — namely that COVID isn’t going away. It’s endemic. It’s not possible to “keep it out,” nor is it possible to have “zero” cases, especially not in sprawling, densely-populated urban centers. If Xi never abandons a strategy aimed at achieving the unachievable, the economy and market sentiment won’t be able to stabilize.
Additionally, Friday was just further evidence to support the notion that both Mainland and Hong Kong shares are almost purely beholden to the vagaries of Party decrees. A command market for a command economy.
Chinese politics is reality vs hubris, and the CCP places its bets on hubris.
That list of CCP priorities and platitudes is laughable, but there was also some statement about (supposedly) ending the crack down on tech, and perhaps some domestic institutions were encouraged to do some patriotically price-insensitive buying like STAT.
All those words from the Politburo, and nary a “transitory.”