Author: Jiaxing Li
Chinese shares experienced an annual rise for the first time after an unprecedented three-year fall, despite a slight slump on the last trading day of 2024. Meanwhile, shares in Hong Kong ended the year on a high note, buoyed by hopes of policy support.
The blue-chip CSI 300, which represents the largest firms listed in Shanghai and Shenzhen, saw a rise of 14.7% this year. This was a much-needed turnaround from the losing streak that began in 2021 due to the impact of the COVID-19 pandemic, a struggling property market, and low consumer confidence.
The market saw a 12.8% rise in 2024, putting an end to a two-year decline. Hong Kong’s key index closed the last session of the year with a marginal 0.1% rise, resulting in a yearly gain of 17.7%, thereby ending four successive years of losses.
“China’s performance in the equity markets was a pleasant surprise for many investors,” noted analysts at Value Partners.
In the second half of the year, a range of measures aimed at monetary policy, the property market, and capital markets were announced. These measures largely exceeded expectations, despite ongoing economic concerns. Chinese authorities have taken some of the most audacious measures since September, including interest rate cuts and incentives for home purchases and stock buying, to strengthen the faltering economy and restore domestic confidence.
According to a note by China Asset Management, stabilizing the capital market has become a policy necessity, and it is broadly agreed that the market is on the verge of recovery.
Banking stocks led the way in onshore market gains this year, with a remarkable rise of 34.7%, as the four largest state banks hit multi-year highs. The chip sector also saw a significant surge of 53.9%, as domestic investors increased their holdings in local semiconductor makers in light of tightening U.S. chip restrictions.
Despite these gains, mainland stocks weakened on the last trading day of the year. The CSI benchmark fell by 1.6% following data that indicated a slower growth rate in China’s factory activity in December due to escalating trade risks.
Dai Qing, a strategist at Changjiang Securities, believes that the market is in the final stage of “policy expectation-driven” trading following key meetings held by Chinese leaders this month.
Looking forward to 2025, Qing suggests that dividend-paying stocks could outperform the broader market in the short term. This is particularly true given potential market disruptions that could occur following the inauguration of U.S. President-elect Donald Trump in January.
