Chinese Communist Party Rolls Out Stimulus Plan, Stock Market Rebounds, Investors Seize Opportunity to Cash Out

On Tuesday, September 24, the People’s Bank of China announced a series of stimulus measures to revitalize the economy, leading to a frenzy in global stock markets. Some investment firms holding shares in Chinese mainland companies seized this opportunity to cash out over $1 billion.

According to Bloomberg’s report on Thursday, global investment group and internet investment company Prosus NV sold all shares of Chinese online travel agency Trip.com in a bulk transaction worth $743 million. Following this, Chinese search engine Baidu sold $534 million worth of American Depositary Shares (ADS).

Insiders revealed on Thursday that Tencent Holdings Ltd., a Chinese internet company, sold shares of brokerage platform operator Futu Holdings Ltd. for $206 million.

Edward Byun, the Co-Head of Equity Capital Markets for Asia (excluding Japan) at Goldman Sachs Group Inc., stated, “The market has shown its ability to handle large transactions.”

On Wednesday, popular Chinese concept stocks in the US stock market showed mixed performance, with the Nasdaq Golden Dragon China Index (HXC) closing down 2.8%.

Among the gainers were TSMC up 0.21%, Pinduoduo up 0.12%, TSMC affiliate UMC up 0.69%, Powerchip up 0.93%, Futu Holdings up 0.85%, Meituan Dianping up 4.48%, Autohome up 2.17%, Huazhu Group up 0.76%.

Among the decliners were Alibaba down 1.78%, NetEase down 0.10%, JD.com down 2.04%, Ctrip down 3.73%, Baidu down 0.84%, China Telecom down 0.07%, Li Auto down 3.84%, BeiGene down 1.24%, KE Holdings down 3.43%, Tencent Music down 4.81%, ZTO Express down 3.42%, NIO down 4.88%, New Oriental down 4.29%, XPeng Motors down 2.52%, and Huazhu Hotels Group down 3.36%.

The stimulus measures by the Chinese Communist Party also pushed the Chinese stock market higher, with both the blue-chip CSI 300 Index and the Shanghai Composite Index rising by over 4%. The Hang Seng Index in Hong Kong surged over 4%, reaching its highest level in four months.

In response, economist Mohit Kumar of American multinational independent investment bank and financial services company Jefferies Group LLC mentioned, “We believe this is not enough to fundamentally change our view on China. More targeted measures are needed to support real estate and infrastructure construction to alter our perspective.”

The Chinese stock market has underperformed in the Asian region, with the CSI 300 Index down 2.3% so far this year, hitting multi-year lows due to sporadic stimulus measures taken by the Chinese government failing to boost the market.

In the second quarter of this year, capital outflows from China by foreign investors reached a historic high, reflecting pessimism towards the Chinese economy. Slowdown in the Chinese economy and escalating geopolitical tensions led foreign companies to withdraw from China to mitigate investment risks.

In August, US retail giant Walmart terminated its eight-year partnership with Chinese e-commerce company JD.com Inc., selling all shares for $3.6 billion.

Bloomberg reported that the Chinese government is considering injecting 1 trillion yuan ($142 billion) into the largest state-owned banks to enhance their ability to support the Chinese economy.

In a report, Morgan Stanley analyst Laura Wang stated that while these measures are “undoubtedly positive,” the key lies in their implementation.