Chinese stocks jump after leaders pledge to loosen monetary policy

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Chinese stocks rallied on Tuesday after the country’s leaders pledged to implement “moderately loose” monetary policy to revive economic growth.

The CSI 300 index rose as much as 3.3 per cent at the open before paring gains to be 1.9 per cent higher. Hong Kong’s Hang Seng rose 1.1 per cent.

Yields on China’s benchmark 10-year bonds slipped five basis points to 1.86 per cent in the morning session, hitting a record low as investors bet on further interest rate cuts from the central bank. Bond yields move inversely to prices. The renminbi strengthened to Rmb7.249 against the dollar.

The rally came after China’s politburo, the Communist party decision-making body chaired by President Xi Jinping, vowed to implement “unconventional” measures to boost growth and stabilise the stock market and property sector.

Policymakers also pledged to adopt “more proactive” fiscal policy, indicating that the amount of government support would increase.

The leaders also vowed to “vigorously boost consumption”, a reference viewed by investors as a focus on demand-side policies.

Dalian iron ore futures rose as much as 3.9 per cent during trading on Tuesday, their largest increase since September when Chinese officials unleashed a swath of stimulus measures. Demand for iron ore, a steelmaking commodity, is closely tied to China’s economic growth.

Markets have interpreted the remarks as indicating a stronger policy stance that goes beyond what was announced in September, said Bank of America analysts.

The readout of the meeting “helps confirm that top leaders are fully aware of the aggregate demand weakness beyond [the] local government fiscal crunch, and they are serious in addressing it”, they said.

“The rising focus on the reactivation of capital market[s] should also help support market sentiment and keep trading volume elevated in the near term,” said Morgan Stanley analysts in a note.

Additional reporting by William Sandlund in Hong Kong