(Bloomberg) — Chinese shares rose in early trading Monday after the Finance Ministry promised new measures this weekend to support the real estate sector and hinted at bigger government borrowing to support the economy.
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The CSI 300 Index rose as much as 1.4% after posting its worst week since late July on Friday. A benchmark for Chinese shares listed in Hong Kong reversed an early loss of 1.1%.
The initial reaction suggests that traders may expect more details to emerge about the country’s fiscal plans in the coming days. Some investors and economists alike had expressed disappointment at the outcome of Saturday’s much-anticipated briefing, where Finance Minister Lan Fo’an refrained from giving a dollar figure for new fiscal stimulus – something markets had hoped for.
The commitment to “budget deficit expansion should help stabilize market sentiment in the near term after the tremendous volatility we have seen since late September,” Morgan Stanley strategist Laura Wang wrote in a note.
Local governments will be allowed to use special bonds to buy unsold homes, Lan and his deputies said at the briefing, without specifying an amount. Lan hinted that there is room for issuing more government bonds and pledged to ease the debt burden of local governments, signaling a possible rare budget revision in coming weeks.
Ahead of the weekend, investors and analysts polled by Bloomberg had expected China to deploy as much as 2 trillion yuan ($283 billion) in new fiscal stimulus on Saturday, including potential subsidies, consumption checks and financial support for families with children.
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