China stimulus lifts local metal shares
companies surged on Wednesday as China's move to prop up its economy is seen boosting demand and prices of metals, but experts remain skeptical of this rally sustaining till there are definitive signs of stronger growth in the world's second-largest economy.
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Hindalco Industries, Tata Steel, JSW Steel, Jindal Steel and Power, Steel Authority of India, National Aluminium Co, NMDC Steel, Hindustan Copper, NMDC, and Vedanta ended 2-7% higher. The benchmark Nifty 50 closed 1% higher.
The Chinese central bank has cut the reserve requirement ratio by 50 basis points — its biggest in two years — a move which is seen to release $140 billion of cash into the system. The country is also reportedly looking to mobilise $278 billion through offshore accounts of Chinese state-owned companies to stabilize equity markets.
«China's will give a boost to the demand, but the Chinese economy is in trouble because of the real estate sector, and today's reaction is, therefore, more of a knee-jerk reaction,» Sunny Agrawal, the head of fundamental research at SBI Securities.
A slowdown in the real estate sector has been weighing on the Chinese economy since the COVID crisis, which is not only slowing its overall growth rate but has also impacted the prices of metals globally, given that China is the largest consumer of metals in the world.
China's economy grew at 5.2% in 2023, and the World Bank sees growth further slowing to 4.5% in 2024.
“The outlook is clouded by continued weakness in the real estate sector and persistently tepid global demand in the short term, as well as structural constraints to growth, including high debt levels, population ageing, and slower
