China Politburo policy shift spurs surge in stocks, bonds

SHANGHAI/HONG KONG (Reuters) -Stocks jumped and China’s government bonds rallied after the Politburo shifted its monetary policy stance to imply more easing is coming, mirroring moves made in previous crises.

Benchmark 10-year yields fell about four basis points to 1.922%, a record low. Hong Kong’s jumped 2.8% to its highest in a month.

China’s growth has stalled as a collapse in the property market crushed confidence and consumption and investors have been eager to bet that the government will ride to the rescue.

China will adopt a “moderately loose” monetary policy, according to an official readout from a meeting of top Communist Party officials, a shift from “prudent” and one it last made in 2010 to support a recovery from the global financial crisis.

It will also stabilise stock and property markets and must “vigorously” boost consumption and expand domestic demand “in all directions”, Xinhua cited the Politburo as saying, remarks directly addressing investors’ main concerns.

“It gives high hope for more monetary support to come, including outright interest rate cuts,” said Frances (BCBA:) Cheung, head of Asia rates and currency strategy at OCBC in Singapore.

The Hang Seng index jumped above the eye-catching 20,000 level after the announcements, while mood-sensitive tech shares surged () 4.3%. There were sharp gainers in sectors from banking to property and consumer companies and volumes leapt.

Chinese shares listed in Hong Kong rose 3.1%.

Explicit mention of the stock and property markets was unusual and shows they are in authorities’ focus, said Kenny Ng Lai-yin, securities strategist at China Everbright (OTC:) Securities International.

Foreign investors have been mostly skeptical of recent gains in China’s markets. However, Janus Henderson Investors’ head of Greater China, Victoria Mio, said the moves showed urgency ahead of expected trade tensions with the U.S.

The Hang Seng is up 12% and China’s benchmark CSI 300 index up 23% since late September, when Beijing kicked off rate cuts and a package of other measures to support the property sector and revive consumer spending.

The yuan was mostly steady at 7.2751 per dollar.

The rally in bond markets has been record-breaking this year and the moves pushed longer-end yields to new lows in anticipation of interest rate cuts. Ten-year yields are down about 70 basis points this year.

“It is expected to boost China’s economic growth next year as more fiscal and monetary policies will be rolled out,” said Ken Cheung, chief Asia currency strategist at Mizuho (NYSE:) Bank in Hong Kong.

The Politburo meeting precedes the annual Central Economic Work Conference later this week, which sets key targets and policy intentions for next year.