The Chinese government has recently made moves to support its property market with a stimulus. This has instigated a bump in Chinese property market stocks. Furthermore, this has also helped give a jump to China tech stocks. Large internet companies like Alibaba and JD.com also performed well.
Both these companies have benefited from the wave of stock rises as macroeconomic changes take effect. This makes sense as this sector relies heavily on the consumer. A better environment for the economy in general therefore has a positive effect on these companies. JD.com went up 5%, whereas Alibaba rose 3.3%, and Baidu jumped up by 3.4%. It shows them having good potential as defensive stocks.
The evidence that the property stock market boom had links to the country’s general stock market rally is obvious. In Shanghai and Beijing, the company loosened rules around mortgages in the hope of incentivising growth in the housing market. By doing this, they were following Shenzhen and Guangzhou in their policies. The effects have already taken place. A large Chinese developer by the name of Country Garden made an agreement on extending certain bond payments, for example.
How China’s Stimulus Affects Tech Stocks
The success of Chinese stocks has given the green light to the Chinese government. From this point, it is likely that Beijing will continue using stimulus to boost the economy. Some US analysts said they believe that they will keep on with this policy until they see the results they desire.
In the immediate short-term, the likes of Alibaba and other tech stocks in China should be happy with this. They could be the best long term stocks as well. It should help them recover from the recent slump. However, it may only be shielding with real underlying economic problems that may persist for a little time. When it comes to Chinese manufacturing, the signs are not good. The sector has been continuously getting smaller for five months in a row, for example.
