Asian equities had a strong night, with Mainland China, Hong Kong, and Japan leading the way. However, Taiwan underperformed in comparison. The strong rally in Mainland China and Hong Kong was attributed to growth stocks and sectors on high volumes, following a Ministry of Finance press conference led by Vice Minister Wang Dongwei. The conference outlined four key areas of focus, including fiscal support for high-quality development, improvement in people’s livelihood, fiscal and taxation system reform, and promoting high-level opening up.
The Ministry of Finance will implement policies to continuously strengthen fiscal macro-control and deepen fiscal and taxation system reform. The focus on tax reform includes moving the collection of consumption tax backward and delegating it to local governments. Additionally, fiscal policy will be moderately strengthened to improve quality and efficiency. These policies aim to intensify the implementation of measures and promote sustained economic recovery.
Separately, the State Council released a five-year urbanization action plan focused on incentivizing urbanization of rural migrant population through policy measures. The real estate sector saw gains in Mainland China and Hong Kong as investors viewed the plan as a potential solution to the supply problem. The market showed little reaction to July’s Manufacturing and Non-Manufacturing PMI data, indicating a focus on positive news and market sentiment.
Foreign investors were net buyers of Mainland stocks via Northbound Stock Connect, leading to a strong day in Mainland China with significantly more advancing stocks than declining ones. China’s bond market also noticed the positive policies, with the Treasury curve steepening. Some US-listed China ETFs saw a decline in shares outstanding, potentially setting the stage for another rally. The Hang Seng and Hang Seng Tech indexes also posted gains, with strong volume and positive performance in various sectors.
In Mainland China, Shanghai, Shenzhen, and the STAR Board all posted gains, with the growth factor and small caps outperforming value and large caps. The Real Estate, Health Care, and Consumer Discretionary sectors were the top performers, while Utilities was the only negative subsector. Foreign investors were net buyers of Mainland stocks through Northbound Stock Connect, contributing to the positive market sentiment and strong performance in various sectors.
Overall, the Asian equities market saw a positive outlook driven by strong performances in Mainland China, Hong Kong, and Japan. The Ministry of Finance’s focus on fiscal support for high-quality development and other key areas of reform contributed to the rally. Investors responded positively to the policies and market sentiment, leading to gains across various sectors and driving foreign investment in Mainland China stocks. The market showed resilience in the face of economic data and external factors, setting the stage for further growth and opportunities.
