China Stocks Jump As Stimulus Optimism Mounts: What's Going On?

Chinese stocks continue to rebound Monday following years of underperformance after China said it would allow homeowners to refinance mortgages, the latest move in a string of measures aimed at supporting its struggling economy.

What To Know: China on Sunday announced that it would allow for the refinancing of mortgages by home buyers, according to a report from the Wall Street Journal.

The report indicates that the move could help recent policy changes more effectively filter through to the markets. Before the mortgage refinancing measures were announced, home buyers were unable to reap immediate benefits from lower interest rates.

“Shortcomings in the current mortgage interest-rate pricing mechanism have become apparent, the public reaction has been quite strong and the need to adjust and optimize is urgent,” China’s central bank reportedly said in a statement.

Under new rules, borrowers will be able to refinance home loans using prevailing market rates for new mortgages if the difference between their rate and current market rates reach a “certain magnitude.” Further details on the threshold were not shared.

The People's Bank of China reportedly said that the new measures will go into effect on Nov. 1.

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The Hang Seng jumped 2% on Monday after rising about 13% last week and the Shanghai Composite soared approximately 8%. Several U.S.-listed Chinese stocks also surged following the announcement.

Alibaba Group Holding Ltd BABA was up 2.05% at $109.51, JD.com, Inc JD was up 3.57% at $41.32, PDD Holdings Inc PDD was up 2.47% at $138.72, Baidu Inc BIDU was up 2.33% at $107.61, Bilibili Inc BILI was up 5.85% at $24.26 and KE Holdings Inc BEKE was up 8.2% at $21.64.

China-based EV names were also getting a boost from the announcements over the weekend including NIO Inc NIO, up 8.97% at $7.10, and Li Auto Inc LI, up 3.47% at $26.67.

The news over the weekend comes after China announced its most aggressive stimulus measures since the pandemic last week and promised that it would deploy "necessary fiscal spending" to meet its economic growth target of 5%.

The moves out of China mark the country's latest attempts to revive an economy that has battled deflationary pressures and growth headwinds due to property declines and wavering consumer confidence.

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