What's Going On With US Listed Chinese Stocks Like Alibaba, JD, Nio On Tuesday?

China's lawmakers have commenced a week-long session to deliberate on what is expected to be the country's most extensive fiscal stimulus since the COVID-19 pandemic, the Financial Times reports. The lawmakers aim to revive confidence in the country's economy.

The Standing Committee of the National People's Congress is considering measures to alleviate the vast debt burdens impacting China's local governments.

U.S.-listed Chinese tech giant stocks Alibaba Group Holding BABA, JD.com, Inc. JD, Baidu, Inc. BIDU, and U.S.-listed Chinese electric vehicle stocks NIO Inc. NIO, Li Auto Inc. LI, and XPeng Inc. XPEV picked up momentum after the stimulus reports.

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The proposed fiscal package, anticipated to reach around 10 trillion yuan (about $1.4 trillion) over the next three years, could be crucial in bolstering local government finances while addressing the broader economic slump.

Economists suggest that this initiative must address the challenges faced by households and local governments to stimulate growth effectively.

One key component of the proposed measures includes raising the cap on local government debt to convert "hidden debt" into formal debt, allowing local authorities to issue up to 6 trillion yuan in bonds.

This approach would replace off-the-books liabilities accumulated through financial vehicles established by local governments over the years.

Goldman Sachs analysts told the Financial Times that easing fiscal constraints on local governments is vital for the overall effectiveness of China's current stimulus efforts.

In addition to addressing local debt, the government is weighing new incentives to stimulate household spending and encourage consumer demand.

There are also proposals to increase the fiscal deficit target to 3.6% of GDP next year, up from 3% this year, alongside a potential issuance of an extra 1 trillion yuan in sovereign bonds to recapitalize large state-owned banks.

China's central bank kept its key policy rate unchanged in October, following rate cuts in September aimed at economic support.

The People's Bank of China (PBOC) provided 700 billion yuan ($98.36 billion) through its one-year medium-term lending facility at a stable 2.0% rate.

The PBOC added 292.6 billion yuan via a seven-day reverse repo at 1.5%. September's easing cycle included lowering the one-year MLF rate from 2.3% to 2.0%, a 20-basis-point cut in the seven-day reverse repo, and a reserve requirement reduction, releasing 1 trillion yuan for lending.

Despite the expansive measures, analysts, including Macquarie's Larry Hu, told the Financial Times that these initiatives may suffice to reach the 5% GDP growth target but might fall short of genuinely revitalizing the economy.

Alibaba considered a Chinese tech barometer, and its peers are recuperating from China's domestic regulatory crackdown and a weak economy, which has led to a price war in its e-commerce and cloud businesses. The EV companies are also bearing the brunt of industry weakness leading to a price war.

Price Actions: At the last check on Tuesday, BABA stock was up 2.58% at $100.94 premarket. JD is up 2.08%, BIDU is up 2.44%, NIO is up 3.70%, LI is up 1.99%, and XPEV is up 4.89%.

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