iM Securities: Chinese Stock Market Hits 10-Year High on Stimulus Expectations

Despite weak economic indicators, the Chinese stock market has reached its highest level in ten years. Analysts attribute this to reduced tariff risks, better-than-expected export performance, liquidity effects, and expectations for additional economic stimulus.

Park Sanghyun, a researcher at iM Securities, explained in a report on the 22nd, "The Shanghai Composite Index recorded the largest increase among major global stock markets in July and August."

The fundamentals of the Chinese economy remain fragile. In July, the retail sales growth rate was 3.7% year-on-year, significantly below the market expectation of 4.6%. The fixed asset investment growth rate also fell to 1.6%, marking the first time it dropped to the 1% range outside the pandemic period. Youth unemployment remains in the 17% range, and producer prices have declined for 26 consecutive months, indicating persistent economic instability.

Nevertheless, the stock market is showing a rebound. Since President Trump took office, the burden of high tariffs has been deferred twice, easing external pressure on China. In addition, robust exports to emerging markets such as ASEAN have led to a cumulative export growth rate of 6.1% through July. Liquidity that could not flow into the real estate sector due to a market slump has instead entered the stock market. Furthermore, ahead of the Fourth Plenary Session in October, expectations for additional interest rate cuts and fiscal expansion are also supporting the market's rise.

However, it was explained that for the Chinese stock market to rise further, another round of stimulus measures will be necessary. Park stated, "It is uncertain whether the rally in the Chinese stock market will continue," but added, "If policy stimulus aimed at achieving growth targets continues, the upward trend in the stock market can be sustained."

He emphasized, "While the US stock market is taking a breather, the strength in the Chinese stock market is a favorable development for global equities," and noted, "The key factors will be whether the US Federal Reserve cuts rates in September and whether the Chinese government introduces additional stimulus measures."