It seems that the Chinese stock market has benefited greatly from the economic stimulus introduced recently by the government to revive the struggling economy. The two major stock indexes, the Shanghai Composite Index and the Hang Seng China Enterprises Index, have recently witnessed a surge. Earlier, it was predicted that the economic stimulus would also benefit the cryptocurrency market. However it suggested that instead of bringing new investment to the crypto market, the stimulus has resulted in driving investment away from the market, especially from the Bitcoin market. Is this capital shift a temporary trend?
China’s Stock Surge: A Result of Stimulus
The two major stock indexes, the Shanghai Composite Index and the Hang Seng China Enterprises Index, have experienced a surge after the introduction of the stimulus by the Chinese government.
It was on September 24 that People’s Bank of China Governor Pan Gongsheng officially announced the government’s plan to introduce an economic stimulus to revive the economy from the brink of collapse. The announcement came at a time when the world was discussing a series of data, which had exposed the dire state of the Chinese economy. The move restored confidence that China could meet its 5% growth target this year.
On September 24, the Shanghai Composite Index was 2,770.43. Right now, it stands at 3,336.49. In September, the market was mostly dull. Till September 13, it had been slowly sliding downward. It was on September 18 that strong buying pressure stepped in. Since then, the market has maintained its positive momentum. Since the economic stimulus announcement, the market has increased at least 20.43%.
The case of the Hang Seng China Enterprises Index looks almost similar. The only difference is that in this market, the bullish pressure came at least a couple of days before it emerged in the Shanghai Index. In this market, buyers took control as early as September 10, when the market was at 6,036.14. On the day the stimulus announcement was made, it already was at a monthly peak of 6,723. Since the announcement, the market has experienced at least 23.9%. Currently, the market stands at 8,330.85.
Impact on the Crypto Market
A recent article states that investors are converting stablecoins like USDT into Chinese stocks to benefit from the Chinese stock market surge. This development has reduced inflow to the crypto market, especially the Bitcoin market.
On September 24, the price of BTC was around $64,253. Though it briefly climbed to a peak of $65,903 on September 28, it plummeted to a low of $60,658 on October 2. The market has not yet recovered from the impact of the fall that occurred between September 29 and October 2. At present, the price remains at $63,432.63 – far lower than the level at which it stood on the day China announced the stimulus.
Many analysts think that the current market focus on China is limiting the upside potential of the Bitcoin market.
Is It a Temporary Capital Shift? Experts Say
Experts like Danny Chong, the co-founder of Digital Asset Association Singapore, believe that the capital shift the global economy has witnessed recently is a temporary trend. He asserts that once the Chinese stock market stabilises, the crypto market will resume its bullish momentum.
Concerns about China’s Stimulus
Many analysts have questioned the long-term potential of the economic stimulus introduced by Beijing. TS Lombard and BCA Research are among the top players that have come out openly against China’s move. Analysts have exposed the inability of the stimulus plan to address the underlying problems of the economy that require immediate attention. They have expressed doubt in the potential of the Chinese stock market to continue the momentum it gained with the stimulus.
In conclusion, although China’s stock surge may temporarily pull investment away from BTC, there is not much to worry about, as most analysts believe that the recent capital shift is temporary in nature and will eventually reverse.
Stay tuned to Coinpedia for more updates on global economic trends!
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