China stocks surge on support hopes, tax cuts

Asia Pacific stock markets mostly rose on Monday as major Chinese indexes leaped more than 4 percent on government stimulus to support economy.

The Shanghai composite added 4.09 percent to close at around 2,654.88. Earlier in the day, the index saw gains of more than 4.5 percent. The Shenzhen index gained 4.89 percent.

The moves followed Friday’s rally in Chinese stocks as authorities took steps to support the market after the release of weaker-than-expected GDP data for the third quarter.

Yang Hai, an analyst at Kaiyuan Securities, said the Friday support “laid the foundations for a rebound” after a slump caused by factors including the China-US trade tensions, domestic economic adjustments and especially concerns over the rising risk of forced margin calls.

“We see a high likelihood that the A-share market will enter a period of rebound,” Yang said in a note. He added that planned tax cuts and the release of individual income tax deductions would particularly support banks, insurance and consumer firms.

On Monday, Asian share markets swung into the black as the promise of more Chinese stimulus helped offset some of those geopolitical concerns while investors braced for the peak of the US earnings season.

“I think the rebound in Shanghai shares had a big impact,” said Yutaka Miura, a senior technical analyst at Mizuho Securities. “After that, the yen weakened somewhat. That, in turn, led to buying of Nikkei futures.”