China Stock Rally Continues on PMIs and Stimulus Prospects.- Chinese stocks maintained their upward trajectory on Monday, extending the rally that began on Friday following significant gains on Wall Street. The release of economic data at the start of the week further supported the positive momentum, particularly benefiting the shares of Alibaba.
Hong Kong’s Hang Seng Index surged 0.8% on Monday, building upon the 4% jump witnessed on Friday. Similarly, the Shanghai Composite saw a 0.1% increase on Monday, following a 0.8% rise on Friday.
The rally in Asian trading was bolstered by the strong performance on Wall Street, driven by last Friday’s encouraging jobs report, which marked the Dow Jones Industrial Average’s best day since November. However, positive reports emerging from China at the end of the previous week attributed to much of the momentum in the China Stocks market.
Investors displayed optimism as they pushed up Chinese stocks on Friday, anticipating that the government would introduce new stimulus measures to support the country’s economic recovery after the slowdown caused by the Covid-19 lockdown last year. Despite a robust start to the year, recent signs of weakening growth in the second-largest global economy have weighed on Asian and global markets. The potential implementation of stimulus policies could reverse this trend.
The release of the purchasing managers’ index (PMI) data on Monday also contributed to the positive sentiment. China’s Caixin services PMI recorded its fifth consecutive monthly increase, reaching 57.1 in May, up from 56.4 in April and surpassing estimates of 55.2. Jim Reid, a strategist at Deutsche Bank, highlighted that the relaxation of anti-Covid measures had stimulated consumer demand in the world’s second-largest economy.
The PMI data signify strength in the Chinese market, offering a more positive outlook than recent gloomy data releases. This suggests that the overall economic situation may not be as bleak as initially feared, especially with the prospect of forthcoming stimulus measures.
These developments are promising for Alibaba (BABA) shares. Despite a lackluster performance so far this year, the Chinese e-commerce giant recently announced an unprecedented restructuring plan aimed at unlocking value for shareholders. Government stimulus efforts and a strengthening Chinese consumer base position both Alibaba’s core business and the underlying fundamentals of the stock to benefit.