HONG KONG: Chinese stocks rose on Wednesday after the country’s top parliamentary body approved an additional 1 trillion yuan ($137 billion) sovereign bond issue to support the economy.

The boost in fiscal stimulus demonstrated the top leadership’s commitment to bolstering economic growth even as the 5% full-year GDP growth target is almost guaranteed, analysts said.

China A-shares had a mild rebound from 4-1/2-year lows. Blue-chip CSI 300 Index rose 0.5%, while the Shanghai Composite Index climbed 0.4%.

Auto and infrastructure stocks shone, advancing 2.9% and 2.4%, respectively.

In Hong Kong, the Hang Seng Index gained 0.6%, snapping a four-day losing streak. The Hang Seng Tech surged 2.2%.

The issuance of extra sovereign debt will widen the country’s 2023 budget deficit to around 3.8% of GDP from a previously set 3%, state media Xinhua said.

It is the first time since 2000 that China has expanded its budget deficit during the fiscal year and the fourth time in history that it has issued special sovereign debt. The most recent issue was to battle COVID-19, analysts said.

“It came to the market as a surprise. China rarely revises its budget,” said Zhiwei Zhang, chief economist of Pinpoint Asset Management.

“Part of the funds raised will be utilised next year, hence this helps to boost growth outlook beyond Q4.” The Standing Committee of the National People’s Congress also passed a bill to allow local governments to frontload part of their 2024 bond quotas.

Amid subdued local government revenue and restricted local government financing, additional Chinese government bond issuance and direct transfer should help ease local fiscal difficulties and support related public investment, UBS analysts said in a note.

In another strong signal of Beijing’s focus on reviving the economy and financial markets, Chinese President Xi Jinping on Tuesday made his first known visit to the nation’s central bank in his 10 years as president, Reuters reported, citing sources.

Separately, Hong Kong plans to cut stamp duty on stock transaction to 0.1% from 0.13% to boost market liquidity, Chief Executive John Lee said on Wednesday while delivering his 2023 policy address.

Lee also said property purchase stamp duty would be halved to 7.5% from 15% for second home buyers and non-citizen buyers. Hong Kong homebuilders edged up 0.4% at the close.


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