U.S.-listed Chinese stocks gain ahead of China’s potential $283B fiscal stimulus package

U.S.-listed shares of Chinese companies were mostly higher Friday, a day ahead of a scheduled meeting at China’s finance ministry where investors anticipate authorities will unleash billions of dollars worth of new economic stimulus.

A briefing is set for Saturday by China’s Ministry of Finance. Market expectation is for a fiscal stimulus package sized at 1.5T-2T yuan ($212.27B-$283B), excluding 1T yuan in recapitalization for big banks, Deutsche Bank said Friday.

“It will be important whether the actual announcement meets this threshold after a week of nervousness following a week or so of euphoria,” Jim Reid, head of global economics and thematic research at Deutsche Bank, said in a note. “Two other key factors will be whether the Ministry of Finance sets a ‘whatever it takes’ tone, and also if there are fiscal measures to support the property sector.”

In the markets, Alibaba Group (BABA) rose 1% during Friday’s session. JD.com (JD) gained 1.5%, Trip.com (TCOM) advanced 2%, Nio (NIO) picked up 0.3%, and ZTO Express (ZTO) moved up 1.3%.

Among exchange-traded funds, Global X MSCI China Consumer Discretionary ETF (CHIQ) tacked on 1%, iShares MSCI China ETF (MCHI) edged up 0.4%, and the GXC SPDR S&P China ETF (GXC) rose 0.2%.

China’s central government and cities in late September began announcing actions aimed at bolstering the key property market and the overall economy, which has yet to make a full recovery after the COVID pandemic. Rate cuts and easier down-payment terms for home buyers were among the measures, and Chinese capital markets landed 800B yuan ($112.30M) for financial firms to purchase stocks. China has set a growth target of ~5% for this year.

Shanghai’s CSI 300 index (SHSZ300) has bulked up ~18% since late September, but it ran into a selloff this week as the stimulus-driven rally lost steam. Earlier this week, China’s economic planner said growth targets were reachable, but investors were disappointed by the lack of further stimulus measures that analysts and economists say are needed to kick up growth in the world’s second-largest economy.

Bank of America (BofA) said Friday it will “buy any China dips” as it anticipates China raising its GDP view from 4.6%, which could spur asset allocation to the country. A record $39.1B was pushed into Chinese equity funds over the past week, BofA said in its Flow Show note, citing fund-tracker EPFR.

Chinese equities pulling back this week “demonstrate just how dependent the rally is on stimulus expectations, especially when it comes to the fiscal part of the package,” Deutsche Bank’s Reid said.

Other China ETFs include: (KWEB), (FXI), (PGJ), (FLCH), (YINN) and (YANG).

The CSI 300 Index (SHSZ300) has risen ~13% YTD while the S&P 500 (SP500) has gained ~21%.