As the year came to a close, Chinese stocks celebrated a significant milestone – their first annual gain since 2020. This achievement marked a turnaround after three years of consecutive declines that were fueled by various challenges including the COVID-19 pandemic, property market issues, and flagging consumer confidence. Additionally, Hong Kong shares joined in on the positive momentum by ending a four-year downward trend, closing out the year with gains supported by optimism surrounding policy support.
The noteworthy performance of Chinese equities did not go unnoticed. Analysts at Value Partners expressed surprise at China’s resilience in the face of adversity. They highlighted that supportive measures introduced in the latter half of the year exceeded expectations and overshadowed prevailing economic uncertainties.
“Various supportive measures announced during the second half of the year…largely surpassed expectations and overshadowed ongoing economic concerns,”
The notable resurgence in Chinese stocks was underpinned by bold initiatives implemented by Chinese authorities beginning in September. These measures included interest rate cuts, incentives for home purchases, and funding programs aimed at boosting stock investments – all designed to prop up the struggling economy and instill confidence among domestic investors.
China Asset Management emphasized the significance of stabilizing the capital market as a key policy objective. They indicated that there is a growing consensus within the industry that the market has reached its bottoming-out phase, suggesting potential for further growth ahead.
In terms of sectoral performance, banking stocks emerged as frontrunners with an impressive 34.7% advance during the year. The semiconductor industry also experienced significant gains of 53.9%, driven by heightened local investor interest amid escalating U.S. chip restrictions.
“Stabilising [sic]the capital market has become a policy requirement…andthe general consensus is that themarket is bottoming out,”
Despite these positive developments, mainland stocks faced some headwinds on the final trading day of 2024 as data revealed a slowdown in China’s factory activity growth for December amidst escalating trade risks. This prompted Dai Qing from Changjiang Securities to note that market sentiment was primarily being influenced by policy expectations following key meetings held by Chinese leaders earlier in December.
Looking towards 2025,Dai Qing suggested that dividend-paying stocks might continue to outperform other segments of themarketinthe short term.Citing potential disruptions stemming from U.S.President-elect Donald Trump’s impending inauguration,some experts believe select sectors could offer stability amid shifting global dynamics.
The year-end rally may have signaled brighter prospects for bothChineseandHongKongstocks,butasthe newyear unfolds,newchallenges and opportunities are suretoemerge.Asinvestorsnavigate this ever-evolving financial landscape,the resilience demonstratedbythese marketsin2024 servesasatestamenttotheir capacityfor reinventionandgrowthinthe faceofadversity.
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