Asia open: The bullish mood is undeniable
|Chinese stocks are sizzling, setting the stage for their best week in a decade, and the ripple effect is being felt across global markets. Risk assets everywhere are catching fire, with the MSCI World Index and S&P 500 notching fresh record highs on Thursday, fueled by a powerful reflationary wave.
However, this momentum might hit a speed bump on Friday as traders could look to lock in profits ahead of the weekend. With the quarter’s end approaching and China’s markets set to close for the Golden Week holiday from October 1-7, some caution might creep into the market. Profit-taking could cool things down, but the bullish mood is undeniable for now.
Chinese shares in Hong Kong are riding high, extending their winning streak to an impressive 10 sessions straight on Thursday, with a 4.75% pop that’s boosted the weekly gains to a jaw-dropping 11%. Not to be outdone, the mainland’s CSI 300 has been on fire too, marking its seventh consecutive day in the green, also racking up double-digit gains for the week.
But let’s not pop the champagne just yet. Whether this rally has real staying power or is destined to fizzle out depends heavily on Beijing’s ability to stick the landing on its economic revival efforts. The question is whether this heady cocktail of liquidity injections and a light sprinkle of fiscal stimulus will create a sustainable recovery—or just another flash in the pan. International investors, for now, are cautiously sipping the Kool-Aid, giving Beijing the benefit of the doubt.
Yet, we can’t ignore the reality: this is a state-engineered rally. Chinese stocks have a long history of short-lived bounces, and Xi Jinping has become a maestro of the “pump and dump”—brief market recoveries that often fail to go the distance. Without state media cheerleading this run and a few Western financial outlets joining the chorus, we might already be looking at the final act.
A recent report from Barclays making the rounds indicates that the property crisis has wiped out a staggering $18 trillion household wealth. And Xi is expected to throw just 2 trillion RMB at the problem. That math? It doesn’t precisely scream economic “game-changer.”
Still, these moves have at least eased some of the near-term pessimism surrounding growth and deflation. Remove the immediate gloom, and suddenly, the horizon looks much brighter—even if China’s deeper structural problems loom large in the background.
Couple that with a U.S. economy tiptoeing towards a ‘soft landing’ while the Fed seems determined to stay ahead of the curve and the global outlook, and well, it’s not looking too shabby after all.
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