China's Ministry of Finance Disappoints Investors' Expectations

Over the weekend, the long-awaited appearance of the Chinese Ministry of Finance did not provide the anticipated boost for the stock markets. Finance Minister Lan Fo'an promised support for the struggling real estate sector and hinted at a possible increase in national debt, but the announcement of a concrete fiscal stimulus was missing. Investors had hoped for comprehensive measures to stimulate consumption but were left disappointed. Shen Meng of the investment bank Chanson & Co. commented on the situation soberly: The gap between expectations and actual announcements was substantial, which is likely to further pressure the already subdued investor sentiment. Market patience is waning, especially after the measures initiated by Chinese authorities at the end of September only led to short-term gains. Market conditions remain tense as the lack of clear impulses keeps the markets trapped in a cycle of gains and losses. On Friday, the CSI 300 Index recorded its largest weekly loss since late July, raising fears that the rally may stall again. Although local governments are allowed to issue bonds to convert vacant properties into social housing, the exact amount of future fiscal measures remained unclear. Britney Lam from Magellan Investments Holdings commented that there is still room for further fiscal stimuli, but more profit-taking is likely in the short term. Inflation data released on Sunday once again highlighted the urgency for additional support—consumer prices rose less than expected, while producer prices continued to fall. Although the CSI 300 Index fell by 3.3% last week, it is still up 21% from its level on September 23, the day before the Chinese central bank announced comprehensive measures. The Hang Seng China Enterprises Index lost 6.6% last week, after having risen by more than 30%. While some market players like Goldman Sachs and BlackRock remain optimistic, others warn of overvalued valuations. Investors are now looking to the next major political meeting of the Communist Party, where further fiscal details are expected. However, the market remains skeptical about whether banks will react positively to further announcements.