HSI and ChinaA50 – Beijing’s “just enough” stimulus
🇨🇳On Monday, China’s State Council, chaired by Premier Li Qiang, pledged to strengthen counter-cyclical macro policy adjustments in response to emerging economic challenges and soft growth in Q3
🔛The policy follow-through has been immediate
📢Yesterday, China cut the rate on its 1-year pledged supplementary lending (PSL) - which offers cheap funding to the country’s policy banks to finance investment - by 25 basis points, while the rate on one-year PSL will be cut to 1.5% from 1.75%
They also announced an interest subsidy for residential mortgages targeting first-time buyers, an annual interest subsidy of one percentage point for up to five years for eligible mortgages up to RMB1 million - targeting lower-tier cities and affordable properties
All measures are effective from tomorrow, and is the first time in the history of the China that the central government has directly subsidized residential mortgage interest, marking a formal extension of property market policy from supply-side relief to demand-side burden reduction (BigGo Finance)
Macquarie Sales and Trading’s (S&T) released a note yesterday on 29 September 2026 with their observations from the State Council meeting and what they expect the Chinese government to do in the fourth quarter of this year
Read on for important disclaimers:
The below communication has been prepared by Sales and Trading (S&T) Personnel at Macquarie and is not a product of the Macquarie Research Department. For important disclosures relating to this communication, please see: www.macquarie.com/salesandtradingdisclaimer
The State Council meeting on September 28 suggests Beijing will do more in 4Q. The main tool will be fiscal policy, with a focus on the “six networks”. At the same time, policymakers may also roll out incremental housing measures.
S&T expects policymakers to do just enough to achieve this year’s 4.5–5% growth target. Thanks to policy support, GDP growth could accelerate from an estimated 4.4% year-on-year (yoy) in 3Q to 4.7% in 4Q, lifting annual growth to 4.6%. S&T does not expect major policy stimulus as long as exports remain strong.
What has happened this year so far
Strength in 1Q: China's growth accelerated from 4.5% yoy in 4Q25 to 5.0% in 1Q26 (Fig 1), when exports surged by 15% yoy on the global AI capex boom (4Q25: 4%). Since 5.0% reached the upper end of this year's growth target of 4.5-5%, the April Politburo meeting characterised the situation as “better than expected”.
Slowdown in 2Q: Under the new policy tone, broad fiscal spending fell by 8% yoy in 2Q, after rising 3% in 1Q (Fig 2). Amid fiscal tapering and the Iran crisis, China's economy slowed meaningfully in 2Q26 to 4.3%. As a result, the July Politburo meeting shifted its assessment from "better than expected" to "difficulties and challenges".
Soft patch in 3Q: Following the July Politburo meeting, however, the August and September data have remained sluggish. Growth in 3Q26 will likely stay below 4.5%, the lower end of this year's growth target. Policymakers are therefore planning to do more to push growth back above 4.5%. Given the latest push, a modest growth acceleration could happen in 4Q.
The big picture since 2024: "Just Enough" rules
Beijing tends to follow what S&T terms as the "Just Enough" rule: doing just enough to meet the official GDP growth target.
2024: Before the Sep policy pivot, consensus expected Beijing to miss the 5% growth target. After the pivot, many thought Beijing would launch major stimulus. Both views proved wrong, as the Sep policy pivot did just enough to achieve the growth target.
2025: In response to the looming trade war, Beijing front-loaded policy support, lifting growth to 5.4% yoy in 1Q25. The trade war turned out to have limited impact. As a result, Beijing tapered policy supports in 2H25, so that annual growth landed at 5%.
2026: The key difference this year is the AI fuelled export boom. Under the “Just Enough” rule, stronger exports imply weaker domestic demand. That said, the policy tapering earlier this year appears overdone. Entering 4Q, policymakers have to recalibrate stimulus to ensure they can still meet the growth target.
Put differently, the stronger the AI-led export boom, the less Beijing needs to do on domestic consumption. At this point, the global AI capex cycle remains robust, with Korean exports surging 78% yoy in the first 20 days of Sep (August: +69%).
🇨🇳On Monday, China’s State Council, chaired by Premier Li Qiang, pledged to strengthen counter-cyclical macro policy adjustments in response to emerging economic challenges and soft growth in Q3 🔛The policy follow-through has been immediate 📢Yesterday, China cut the rate on its 1-year pledged supplementary lending (PSL) - which offers cheap funding to the country’s policy banks to finance investment - by 25 basis points, while the rate on one-ye...
What Beijing will do in 4Q
On September 28, Premier Li Qiang chaired an executive meeting of the State Council, reiterating the goal of meeting the annual growth target. Compared with the July Politburo meeting, the language sounds more urgent, signalling that another round of mini stimulus is underway.
Fiscal: The main tool will be fiscal policy, focused on the “six networks”, which combine old and new infrastructure projects such as power grids, water networks, computing power networks and so on. Financing will be supported by the RMB800 billion policy based financial instrument, whose deployment began in early September.
• The meeting called for accelerating government bond issuance. Indeed, the pace of issuance has picked up since end August, with RMB2.1 trillion net issued (15% of the annual quota) over the past five weeks. The meeting allows local government to tap some of the unused debt quota from previous years. Going forward, Beijing may also allow local governments to issue part of next year's debt quota in advance.
Housing: Housing was another highlight of the meeting, as it is the first time since end July that top leaders have explicitly mentioned housing policy. The housing market remained weak in Sep, when new home sales in 30 major cities fell 12% yoy, after dropping 6% in August. Meanwhile, the new presale rule announced on Aug 28 could significantly weigh on developers' cash flows.
• In the near term, policymakers will likely roll out some supportive measures. These measures, however, will likely remain what S&T describes as conventional housing measures, i.e. lowering transaction and financing costs for homebuyers. For instance, policymakers could roll out interest subsidies on (new) mortgages, and/or expand eligible uses of the housing provident fund at lower costs.
Monetary: Regarding monetary policy, yesterday’s meeting called for raising relending quotas for tech innovation, agriculture and SMEs. In other words, the PBoC will continue to rely on structural monetary policy instruments, while the likelihood of an outright rate cut remains low. This also reinforces S&T’s view that only a mini stimulus is currently in play, aimed at doing just enough to meet this year's growth target.
----------------------------------------------------------------------------------------------------------------
HSI and ChinaA50 Warrants to trade the moves in Chinese shares
Apart from Hang Seng Index (HSI) warrants, warrant investors now have the option of using ChinaA50 warrants to trade the moves in Chinese shares!
The iShares FTSE China A50 ETF (2823 HK) is a Hong Kong-listed ETF that aims to track the FTSE China A50 Index — a benchmark of the 50 largest companies listed on the Shanghai and Shenzhen stock exchanges
Top 10 stocks on the ETF include Kweichow Moutai, CATL, Zhongji Innolight and China Merchants Bank.
Meanwhile, the benchmark HSI tends to react to news from China, given that many of its index constituents are Chinese companies.
Bullish investors who believe that the HSI / ChinaA50 index may head yet higher in the short term can consider using call warrants which move in line with the underlyings they track.
On the other hand, bearish investors who believe that market may start heading lower from here in the short-term can consider put warrants.
Warrants move in greater percentages than the price movements in the underlying assets that they track, while requiring a lower capital outlay compared to investing directly in the underlying asset, and come without the risk of margin calls.
Trending HSI and ChinaA50 warrants
🇨🇳On Monday, China’s State Council, chaired by Premier Li Qiang, pledged to strengthen counter-cyclical macro policy adjustments in response to emerging economic challenges and soft growth in Q3 🔛The policy follow-through has been immediate 📢Yesterday, China cut the rate on its 1-year pledged supplementary lending (PSL) - which offers cheap funding to the country’s policy banks to finance investment - by 25 basis points, while the rate on one-ye...
$HSI 26800MBeCW261127(JEBW.SI)$
$HSI 22600MBePW261127(ZH5W.SI)$
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
