Topline
Chinese stocks surged Thursday as investors responded favorably to Beijing’s commitment to jolt its economy, with New York-listed shares of the firms adding hundreds of billions of dollars, helping boost American stocks as well.
Traders work on the floor of the New York Stock Exchange prior to Alibaba Group’s initial price … [+]
Key Facts
The 20 largest Chinese companies dually listed on the New York Stock Exchange and Nasdaq tacked on $71 billion of market capitalization in the U.S., led by the more than $15 billion respective rallies from e-commerce giants Alibaba and Pinduoduo.
The 20 stocks gained an average of 11% in New York by about 10:15 a.m. EDT, according to Yahoo Finance data.
That helped boost the Nasdaq Composite tech stock index 1% to a two-month high; the U.S.’ other leading stock indexes, the S&P 500 and Dow Jones Industrial Average, rose a more modest 0.6% and 0.5%, respectively partially tied to the fact the dual-listed Chinese stocks only factor into the Nasdaq.
The stateside gains followed massive gains in Asian trading for Chinese companies, as China’s CSI 300 index and Hong Kong’s Hang Seng index tacked on about 4% apiece.
The rally stems from the latest indications the Chinese government is willing to deploy hundreds of billions of dollars worth of economic stimulus and a Bloomberg report that the government is weighing a massive $142 billion capital injection into state-run banks, all building on China’s central bank announcing Wednesday it was lowering interest rates by its steepest amount ever.
The last week has been a “whole shift” from the Chinese government as it brings out the “big guns” policy-wise to support growth, hedge fund billionaire David Tepper told CNBC’s “Squawk Box” on Thursday morning, adding he’s buying “everything” he can get his hands on tied to Chinese equities.
Surprising Fact
This week is on pace to be the best week for the CSI 300, which is up 10.8%, since Dec. 2014, and for the Hang Seng, which is up 9.1%, since Oct. 2011. The “compelling” backdrop for a “tactical recovery” came as new money flowed in following the weakest hedge fund allocation to Chinese stocks in a decade, noted Goldman Sachs analyst Kinger Lau in a Wednesday note to clients.
Crucial Quote
“This could be a game changer” for Chinese stocks, Solita Marcelli, UBS Global Wealth Management’s chief investor officer, Americas, wrote to clients Thursday, though she noted risks from aggressive U.S. tariffs should former President Donald Trump win the presidency in November.
Key Background
The 20 largest Chinese stocks used in the market value calculations are according to the U.S.-China Economic and Security Review Commission’s Jan. 2024 compilation. Despite this week’s explosive rally, Chinese stocks are mired in an extended slump as the country’s economy struggles to return to its pre-pandemic expansion rate. The CSI 300 has provided a 6% return to investors year-to-date and a -21% return over the last three years, far underperforming the S&P’s 21% year-to-date and 35% three-year returns. U.S. trading of Chinese stocks involves the exchange of American depositary receipts, which entitle investors to equity in Chinese firms without direct ownership.
Tangent
European luxury stocks, which were badly battered by diminished demand in China, soared Thursday as the market adjusted to optimism about a Chinese recovery. Shares of French firms LVMH, Hermès and Dior rose 9% apiece in Paris trading.
