Hong Kong’s Hang Seng index rose sharply off 14-month lows on Tuesday, leading Chinese bourses higher, following a report Beijing was considering a $278 billion package to support the country’s stock market.
Authorities are looking to utilize about 2 trillion yuan ($278 billion), primarily from the offshore accounts of Chinese state-owned enterprises, as part of a stabilization fund, Bloomberg reported, citing people familiar with the matter.
The mooted move by China’s policymakers comes after Premier Li Qiang on Monday said forceful and effective measures will be taken to support market confidence.
Stocks have slumped as investors worry about a number of issues, including; relatively meager economic growth amid a decline in foreign fixed-income investment; a crisis in the the heavily-indebted property sector; heightened tensions between Beijing and Washington; and an apparent reluctance by the authorities to consider a large stimulus.
Reports of the support package helped the Hang Seng bounce 2.6% on Tuesday and lifted the Shanghai Composite up 0.5%.
The Hang Seng
HK:HSI
had closed on Monday at its lowest level since October 2022, taking its losses since the start of the year to 12%, while the mainland Shanghai Composite
CN:SHCOMP
hit its lowest in nearly four years, having shed about 7% in 2024.
However, some analysts expressed doubts that the fund would be sufficient to provide a sustainable rally for Chinese equities.
“It is worth noting that the current size of this fund is dwarfed by the $6 trillion that has been wiped off of Chinese and Hong Kong shares since their peak in 2021,” said Kathleen Brooks, research director of XTB .
“Thus, it could take much more than this package to stabilize the Chinese share market in the long term,” Brooks added.