China stock market up 27% in 1 month! For how long this rally will sustain? Expert's takehttps://t.co/iTyshYVVF0
— ET NOW (@ETNOWlive) October 8, 2024
China’s stock market surge, fueled by stimulus measures from Beijing, may be drawing capital away from cryptocurrencies and other Asian markets. The Shanghai Composite Index has jumped over 20% since September 24, reaching its highest level since May 2023. The Hang Seng China Enterprises Index, which includes Chinese stocks listed in Hong Kong, has surged over 25%.
? LATEST: Binance Releases 23rd Proof of Reserves Report
Binance's latest Proof of Reserves shows a slight dip in user assets across major cryptocurrencies:$BTC: 596k, down 1.58%$ETH: 4.425 million, down 1.37%$USDT: 21.41 billion, down 3.16% pic.twitter.com/aBOdRVcIdq
— Cointelegraph (@Cointelegraph) October 8, 2024
Danny Chong, co-founder of multi-staking protocol Tranchess and co-founder of Digital Assets Association Singapore, said, “The current surge in Chinese stocks, driven by the stimulus package and investor activity during the national holiday week, represents a calculated risk-reward trade for savvy investors. Even with a 3-5% cost to convert [stablecoin] USDT into equities, the potential upside of 50-70% makes this a strategic move.”
? JUST IN: Trillions Flow into China Stocks, #Bitcoin Set for Comeback
Investors chasing massive gains in China stocks, but experts predict capital will flow back into crypto once the rally cools down. pic.twitter.com/epEwIFZe6T
— Cointelegraph (@Cointelegraph) October 7, 2024
The stimulus package, estimated to be over 7.5 trillion yuan (CNY), includes interest rate cuts, liquidity support for stocks, capital injections into the banking system, and a promise to support property prices.
China’s stimulus draws capital shift
While this has been widely bullish for bitcoin and other risk assets, bitcoin remains stagnant at around $64,000, continuing a six-month-long consolidation between $50,000 and $70,000. Eric Yee, senior portfolio manager at Atlantis Investment Management in Singapore, said, “We are trimming our long positions across Asia to fund China purchases.
However, Chong believes the capital shift toward China is likely temporary, and investors will eventually refocus on cryptocurrencies. Once the peak of the recent upward move in Chinese equities stabilizes, we can expect to see a redeployment of capital back into crypto.
This is a prime example of the maturing mindset of investors who are willing to move across asset classes to optimize their returns,” he said. Traditional market analysts believe Beijing’s latest stimulus measures may not address underlying economic issues and may not lead to a long-lasting rally in Chinese stocks. TS Lombard noted that the stimulus measures equate to only 1.5% of China’s gross domestic product, compared to 32% in 2008 and 22% in 2015-16, suggesting the spillover effects may be limited this time.
