In a striking turn of events, the financial landscape in China experienced notable shifts following the close of the A-share market on the evening of October 29. The A50 index, which tracks the performance of the top 50 A-share stocks, saw a rapid and significant increase, climbing by more than 1.5% at one point. This uptick was translated into the off-shore renminbi (RMB) as it surged against the US dollar, rising approximately 100 points within just an hour to settle at 7.1540. However, when examining daily fluctuations, it is noteworthy that the off-shore RMB actually showed a slight decline on that day.

The abrupt escalation of the A50 index was largely attributed to a wave of overwhelmingly positive news from external markets, echoing the expectations surrounding forthcoming economic policies. This momentum was fueled by remarks made on October 25 during the World Bank’s 110th Development Committee meeting in Washington, D.C. Li Min, the Vice Minister of Finance, highlighted that aside from monetary policy, there would be a concerted effort to strengthen fiscal policies aimed at countercyclical adjustments. This initiative encompasses a broad range of measures—from alleviating local government debt and stabilizing the real estate market to boosting incomes for key demographics, ensuring a safety net for livelihoods, and supporting the renewal of equipment and consumer goods through trade-in programs.

Advertisement

Indeed, the Chinese government is optimistic about achieving a GDP growth target of around 5% for the year, aspiring to be a contributor to global economic growth amid uncertainties. In alignment with this vision, recent developments in international trade further highlight China's active approach to fostering economic exchanges. For instance, China National Offshore Oil Corporation (CNOOC) struck a significant deal with Thailand's state-owned PTT PLC to conduct international liquefied natural gas (LNG) trade settled in RMB. This landmark agreement not only enhances cooperation between the two nations' major oil and gas firms but also paves the way for increased cross-border RMB settlements.

PTT PLC is the primary state-owned oil and gas company in Thailand, headquartered in Bangkok. It plays a pivotal role in the national energy sector, encompassing exploration, production, refining, storage, and sales across upstream and downstream operations. On the other hand, CNOOC stands as the earliest participant in the LNG industry in China and is a major player in LNG imports, consistently pioneering the innovation of international resource pricing and settlement models. The successful execution of this cross-border LNG trade transaction in RMB underscores CNOOC's commitment to accelerating the globalization of energy trade and diversifying the LNG trading ecosystem.

In addition to the LNG trade, another significant moment for the Chinese shipping industry transpired on October 28 when Shanghai-based Hudong-Zhonghua Shipbuilding (Group) Co., Ltd, along with China Shipbuilding Industry Corporation and China COSCO Shipping Corporation, signed a major contract for the construction of six large container ships, each with a capacity of 13,600 TEU, specifically powered by conventional fuels. Notably, this contract follows just ten days after a similar agreement signed with Canada's Westsea Company, further reinforcing the growing tendency of utilizing RMB as a settlement currency in international shipbuilding.

These developments represent a blend of key elements, encapsulating the interplay of domestic shipowners, Chinese classification societies, local shipbuilding industries, and the RMB settlement framework. The rise in RMB swaps and the continuous evolution of cross-border payment systems have accelerated the internationalization of the renminbi, marking a notable milestone in China’s efforts to promote its currency on the global stage.

Meanwhile, in the A-share market, major indices recorded collective pullbacks, with both the Shanghai Composite Index and the Shenzhen Component Index witnessing declines exceeding 1%. However, the overall trading volume surpassed the 2 trillion yuan mark, reflecting a robust presence of trading activity. Conversely, the Hong Kong stock market showed resilience, with the Hang Seng Index climbing by 0.49% and the Hang Seng Tech Index rising by 1.09%.

According to analysts, this fluctuating scenario paints an intriguing picture of investor sentiment, particularly regarding macroeconomic expectations. Yang Chao, a strategist at Galaxy Securities, indicated that the current valuation of the A-share market sits at a historically moderate level. While improved expectations for domestic economic performance exist, uncertainties surrounding factors such as the US elections continue to loom large. Thus, there is optimism that the A-share market may experience upward movement in the longer term.

Adding to this analysis, Zhang Gang, an analyst at Zhongyuan Securities, emphasized that the average price-to-earnings ratios for the Shanghai Composite Index and the ChiNext Index are currently at median levels not seen in the past three years, suggesting a favorable window for medium- to long-term investments. These assessments indicate a cautious but optimistic outlook on the potential for recovery and growth within the A-share market as favorable policies and proactive fiscal measures begin to take shape.