China's Politburo mentioned these two words for the first time in more than a decade. Stocks soared.

MW China's Politburo mentioned these two words for the first time in more than a decade. Stocks soared.

By Steve Goldstein

Chinese stocks surged in late Hong Kong trade on Monday in the latest government announcement promising action to boost its stuttering economy.

Down as much as 0.9% earlier in the session, the Hang Seng HK:HSI finished with a flurry, rising 2.8%. The announcement was timed after the local market close, as the Shanghai Composite CN:SHCOMP ended slightly lower.

Hong Kong-listed stocks including JD.com (HK:9618) $(JD)$ and Alibaba (HK:9988) $(BABA)$ joined a broad-based market rally.

Crude-oil futures (CL00) extended gains after the announcement.

A statement from the Chinese Politburo said it will "implement more proactive fiscal policies and moderately loose monetary policies, enrich and improve the policy toolbox, [and] strengthen extraordinary counter-cyclical adjustments," according to an English translation.

Analysts at Societe Generale say that's the first mention of "moderately loose" with regard to central-bank policy since 2011. The use of "extraordinary" is new, they added.

The mention that both the housing and stock market should be stabilized is an indication of "high-level recognition of the importance of wealth effects," the analysts said.

The government still has been coy about what it will do next year, as the economy not only confronts a struggling domestic property market but possibly a new series of tariffs under President-elect Donald Trump.

So far there's been a series of rate cuts and a local government debt swap, among other steps China's government has done to shore its economy.

Analysts at Goldman Sachs forecast a fiscal deficit of 1.8% of GDP, 40 basis points of monetary policy easing and more easing measures for the property sector next year.

Over the last three months, the iShares MSCI China ETF MCHI has rallied 17%, vs. a 13% gain for the S&P 500 SPX over the same timeframe.

-Steve Goldstein

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December 09, 2024 08:50 ET (13:50 GMT)

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