China’s property stocks led the way in a stock rally on Monday, with positive news for the sector. However, there were also significant gains for the country’s largest internet companies.
E-commerce Giants Benefit from Macro Developments
Alibaba and JD.com, the e-commerce giants, have become sensitive to macroeconomic developments recently, as they heavily rely on the health of the consumer. In Hong Kong trading on Monday, Alibaba jumped 3.3%, JD.com climbed 5%, and Baidu rose 3.4%.
Expectations for US Trading
As the US market was closed on Monday for Labor Day, the American depositary receipts (ADRs) of these companies may catch up with their gains in Tuesday’s trading.
Factors Driving Chinese Stock Rally
The rally in Chinese stocks on Monday was primarily driven by positive developments in the struggling property sector. Beijing and Shanghai relaxed mortgage rules to boost housing demand, following Guangzhou and Shenzhen in easing their policies. Additionally, Country Garden, one of China’s biggest developers, reached a deal with creditors for an extension to onshore bond payments.
Positive Outlook for Tech Giants
The measures taken to stimulate the property sector have resulted in a broad-based rally in Chinese stocks, including tech giants like Alibaba and JD.com. The market sentiment suggests that Beijing may continue implementing stimulus measures. An analyst from Goldman Sachs expects these measures to continue until policymakers are satisfied with the outcomes.
Chinese Consumer and Economic Data
The positive news regarding the stimulus measures is beneficial for Alibaba, JD.com, and other technology giants that rely on the Chinese consumer. While there is still a risk of gloomy economic data in the near term, there have been some positive signs. Despite China’s manufacturing sector contracting for a fifth consecutive month in August, it beat expectations by only slightly crossing the 50 mark that separates contraction from expansion. In addition, surveys conducted by independent research firm China Beige Book last month also indicated areas of improvement.
