A-share market rises on fresh growth hopes

Latest policies to boost consumption, revive realty get investor thumbs-up

China's latest policies to spur growth buoyed the A-share market on Monday with some heavyweight sectors rebounding strongly, lifting the benchmark Shanghai Composite Index by 0.46 percent and the Shenzhen Component Index by 0.75 percent, market insiders said.

Shares of listed department stores and retailers rose the most (almost 4 percent on average). Of the 66 companies monitored by market tracker Wind Info, nine touched the 10 percent upper limit.

On Monday, well before the market close, the National Development and Reform Commission, the country's top economic regulator, announced that more measures will be rolled out to facilitate the recovery and expansion of consumption.

In its announcement, the NDRC said the process to buy cars should be optimized while encouraging more consumption of new energy vehicles. In response, shares of carmakers surged by 3.75 percent on average.

Prices of hotels and tourism agencies also jumped 3.31 percent on average, as the NDRC said the consumption scenarios of tourism should be further enriched and more consumption should be made possible during holidays.

Shares of property developers rose nearly 3 percent on average. The Ministry of Housing and Urban-Rural Development said on Friday that strong support will be given to meet both inelastic demand and demand from existing homeowners seeking to upgrade their housing.

Down payment and home loan interest rates for first-time homebuyers will be lowered. Taxes will be exempted for existing homeowners who sell their homes to fund the purchase of better-quality houses.

Leading firms in the property industry, which is undergoing a supply-side reform, will generate extra profits for retail investors in the A-share market with the implementation of the above policies, said experts from China International Capital Corp Ltd.

On Monday, shares of listed securities companies in the A-share market gained 1.17 percent on average, following a 7.27 percent surge on Friday.

The Political Bureau of the Communist Party of China Central Committee said during its meeting on July 24 that more efforts should be made to invigorate the capital market and boost investor confidence.

Experts from Western Securities said the top leadership's guidance will shape the expectations of the capital market and boost risk appetite — and securities firms will also benefit in the process.

The strong stock-market performance of securities firms can be considered a prelude to an overall bull run, said analysts from Essence Securities after reviewing all the 12 major rallies of securities firms since 2010.

The combined trading value of the Shanghai and Shenzhen bourses came in at 1.1 trillion yuan ($150 billion) on Monday. Foreign investors increased their exposure to A shares by nearly 10 billion yuan on Monday via the northbound leg of the stock connect program linking the Shanghai, Shenzhen and Hong Kong bourses.

According to Wind Info, northbound capital reported a net inflow of over 230 billion yuan as of Monday, exceeding the full-year figure of 90 billion yuan in 2022.

Meng Lei, China equities strategist at UBS Securities, estimated the 2023 full-year northbound capital inflows will reach around 300 billion yuan. More such capital inflows can be expected in the second half amid the expected recovery of consumption and market sentiment.

As more mutual fund products will be released later this year, the A-share market performance will likely receive a further boost in the following months, he said.