EBC Markets Briefing | Chinese stocks undergo a good test

Chinese stocks steadied on Thursday after heavy sell-off. Analysts say positive momentum will likely hinge on the magnitude and execution of more fiscal policy, rather than just monetary support.

The A50 fell sharply in the last session with the Hang Seng index wiping out all the gains made during the National Day holiday. Some are starting to worry this could be another false dawn.

Local tourists spent less during the holiday than they did in the break before the pandemic, suggesting consumer sentiment remains muted despite some signs of stabilization.

Leveraged equity positions in China surged at the fastest pace in more than a decade as traders boosted risky wagers upon on a rally that could parallel that in 2008 and in 2015.

Retail investors are hungry for more gains. A gauge tracking transfers from savings accounts into stock accounts by the ICBC more than tripled on Tuesday from 30 Sept levels, media reports show.

The pullback provides a more attractive entry point for those who missed that initial whoosh. Today may be a good test for Chinese markets, while demand for US assets from Asia remains strong.

The A50 index rebounded off the support around 13,200, cementing the case for more gains. But a push above 14,600 may be needed to convince more bulls to pour money in.

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