Nomura Holdings’ chief China economist Lu Ting has given a strong endorsement of China’s stock market performance over the past year and a half, calling market revitalisation the most successful policy achievement in that period.
“The most successful policy adopted in China over the past year and a half was to invigorate the stock market, which resulted in rising share prices of most companies,” Lu said at a recent media event hosted by Nomura, adding that he would give the market’s performance a “full score.”
Lu said the latest market upswing reflects a relatively well-calibrated policy mix, with authorities striking a balance between supporting growth and managing financial risks. “So far, financial regulators have performed very well, implementing bold measures while exercising great caution to stabilise the market,” he said.
Commenting on the recent move by China’s three major stock exchanges to raise minimum margin requirements for leveraged stock purchases, Lu said the decision underscored regulators’ determination to avoid excessive speculation. One of the key objectives of the current bull market, he noted, is to prevent a repeat of the “crazy bull market” seen in 2015, which was followed by a sharp collapse.
“The overall policy environment has been relatively conservative and stable since July to August last year,” Lu said, arguing that timely cooling measures are necessary to prevent overheating and a widening gap between stock prices and underlying economic fundamentals.
Looking ahead, Lu said that if current policies remain effective, economic data in the second half of the year are likely to continue improving. Given the low comparison base in the second half of last year, he expects economic growth this year to follow a pattern of “lower at the beginning and higher at the end.”
Lu also said there is a possibility of a 10-basis-point cut in the benchmark interest rate in the second quarter, though he cautioned that the impact may be limited. “China’s interest rates are already relatively low by global standards, so the marginal boost from a rate cut could be modest,” he said.
He added that fiscal policy will be the core pillar of China’s macroeconomic strategy this year, with structural monetary policy playing a supplementary role.
