Policymakers are seeking to mobilise about 2 trillion yuan ($278 billion), mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilisation fund to buy shares onshore through the Hong Kong exchange link, the report said, citing people familiar with the matter.
I feel this 278 billion $ plan will not amount to much, this rally might fizzle out in some time. What I understand is they are trying to prop up the share prices rather than increasing the companies’ earnings. In my opinion, the economy will only restart when interest rates are cut down.
One more floating theory is Xi Jinping wants society to be more equitable. He won’t cut the rates as it increases speculation and leads to more inequality in society.
There are other concerns as well like the slowing down of the global economy because of high interest rates and the victory of Donald Trump. Some liquidity crunch is even visible in the Indian banking space where major banks are fighting for deposits.
Chinese markets might rally but as of now, I am not comfortable investing a big amount unless there is an announcement of interest rate cuts.
I can be wrong in my understanding. Let’s see how it unfolds.
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