Why Chinese stocks slipped late this week after monster price hike

The great rally in Chinese stocks since 2024 appeared to have run its course by Thursday afternoon. However, big bursts in share prices in that economy still left them in positive territory compared to levels since last Friday’s market close.

Investors flocked to every sector imaginable, so we could have thrown a dart at a board full of US-listed Chinese stocks and hit all the winners. According to data compiled by S&P Global Market Intelligence, Bilibili (BILLS -8.80%) is up 18% year to date as of Thursday evening. Tencent Music Entertainment Group (TME -1.60%) and Studio City International Holdings (MSC -2.37%) increased by 10% and 11.6% respectively. Crushing them all was Up Fintech Holding (TIGER 14.02%)which increased by over 100% more.

What goes up must come down

The rally was sparked by the Chinese government’s unveiling of its latest economic stimulus package, aimed at putting the massive but struggling economy on a stronger growth path. At the same time, authorities have signaled hope for improvement in sluggish and often contentious corners of the economy, such as real estate and financial services; they’ve announced direct material support for both industries (get up to double the price and then some of Up Fintech).

Still, a stimulus package, even one of the large-scale ones favored by the Chinese powers, has its limits. This was only announced and not implemented. And while it’s sure to help the national economy to some extent, it’s not a panacea – anything that will instantly pull it out of the state. Beijing Talks Talks With Its Business Incentive; we’ll see if he can effectively walk the walk.

Robust rallies also have a way of exposing profit takers and short-term speculators (who are often one and the same). This is especially true in this case, when a wide variety of stocks have been ignored and remained at low prices for some time and have suddenly been jolted by adrenaline. It is tempting for every investor to make a double or even triple digit profit for just a few days of holding the stock. Such selling contributed to a fairly sharp price reversal on Thursday.

He wasn’t counting them yet

I don’t think we’ve seen the last of the price hikes. Rather, Thursday’s correction looks more like a lull to me as market players consider their next move. It will take some time to implement the full stack of measures announced by the government and even longer to properly assess their effects. Meanwhile, investors will scramble to bet on the stocks best positioned to benefit from that energizing top-down injection of rocket fuel.