Stocks in China and Hong Kong experienced a notable rebound on Wednesday, as investor sentiment was buoyed by encouraging reports. A Reuters article revealed that China is preparing for a record budget deficit for 2025, alongside a push from Beijing for state-owned companies to enhance their market value.
The Shanghai Composite index closed higher, up 0.62% to 3,382.21, recovering from a 0.73% drop the previous day. Similarly, the CSI 300, which tracks large-cap stocks, gained 0.51%. In Hong Kong, the Hang Seng index rose by 161.60 points, or 0.82%, to 19,815.30, recovering from a 0.5% decline earlier in the week. The Hang Seng China Enterprises index saw an increase of 1.08%, while the Hang Seng Tech index surged by 1.8%.
Investor confidence strengthened as the afternoon session progressed, with most sectors finishing in positive territory. Key sectors such as semiconductors and state-owned enterprises saw solid gains of 1.6% and 1%, respectively. In particular, state-owned companies listed in Hong Kong rose by 0.8%.
A key factor contributing to the market’s positive performance was the State-owned Assets Supervision and Administration Commission’s recent guidelines, which encourage state-owned firms to improve the management of market value for listed companies. These guidelines included suggestions for mergers and acquisitions, enhanced information disclosure, and stock buybacks.
Investor optimism was further supported by the expectation of increased fiscal stimulus. The Reuters report indicated that Chinese leaders had agreed to raise the budget deficit to 4% of GDP next year, the highest in history, while maintaining an economic growth target of approximately 5%. Morgan Stanley praised the potential plan, suggesting that it signals Beijing’s commitment to market confidence through high growth targets and a substantial fiscal budget, though more details are expected to be released in March.
Market sentiment in China and Hong Kong was driven by the prospect of greater fiscal support and efforts to boost the value of state-owned companies, helping to reverse earlier declines and energising investor confidence.
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