Many questions directed at the government of China were about whether enough was being done to reinvigorate growth. It appears they’re listening, adding more stimulus measures.
Given this latest development, traders may want to keep bullish China ETFs at the ready. This is especially so if the latest round of assistance makes a tangible impact. A pair of funds to watch include the Direxion Daily FTSE China Bull 3X ETF (YINN) and the Direxion Dly CSI 300 China A Share Br 1X ETF (CHAD).
“China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help the economy meet the official growth target, according to people familiar with the matter,” reported Bloomberg, Bloomberg added that lawmakers are “weighing the issuance of at least 1 trillion yuan ($137 billion) of additional sovereign debt for spending on infrastructure such as water conservancy projects, said the people, asking not to be identified, discussing a private matter.”
“That could raise this year’s budget deficit to well above the 3% cap set in March, one of the people said,” the report added. “An announcement may come as early as this month, another person said. Although deliberations are ongoing and the government’s plans could change.”
China Solidifies Financial System
Much of China’s focus has been supporting its real estate sector. That’s another important component of reviving economic growth is shoring up the financial system. To prevent the contagion from the real estate property development crisis, China is also adding support for small banks.
In addition, Barron’s reported that the country’s sovereign wealth fund is betting on large banks — in particular, four of its largest banks have been seeing an influx of investment capital. These names include the Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and the Agricultural Bank of China.
“The move by the sovereign wealth fund also had a wider impact on investor sentiment. This is feeding into hopes that the Chinese government is taking meaningful stimulus action,” the Barron’s report said. That is exactly what Chinese equities need at the moment to restore investor faith domestically and internationally.
“In Asia, we’ve seen that broadly positive performance continue in markets, with gains for all the major equity indices. The Hang Seng is leading the way, and was supported by the news that China’s sovereign wealth fund had bought shares in some of the nation’s biggest banks,” said Jim Reid, a strategist at Deutsche Bank.
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