Investing.com — Chinese stocks are likely to see higher volatility in the coming days as investors digest the government’s recent round of stimulus, UBS analysts said, while pointing to the potential risks of a disappointing stimulus package.
China and the indexes have seen wild swings in recent sessions after the government announced plans to unleash more fiscal stimulus for the economy. But a lack of crucial details about the planned measures, especially their timing and scale, disappointed some investors.
China’s benchmark indexes had risen to a two-year high earlier in October on optimism about more stimulus. But this rally now seemed to have fizzled out.
“Investors remain highly sensitive to policy signals and are ready to respond quickly. “If Beijing’s fiscal package does not meet expectations or if policymakers remain silent in the coming weeks, we could see the market take another hit,” UBS analysts said.
They expect Beijing to release more information on the planned fiscal measures in the coming days, especially given that planned increases in government spending will have to be approved by the National People’s Congress, which meets later in October.
The Chinese Ministry of Finance last weekend outlined plans for a range of fiscal measures, including the issuance of local government bonds, higher budget spending and some supportive measures for the real estate market.
But investors were disappointed by the lack of explicit measures to support personal consumption, which has been a key weakness for the Chinese economy. Recent data also showed a continued deflationary trend in the country.
The Ministry of Finance has also not provided details on how and when the planned fiscal measures will be implemented, adding further uncertainty.
China has been struggling with sluggish economic growth for two years and may miss the government’s 5% annual gross domestic product target by 2024.
