Chinese stocks marked a significant recovery in 2024, registering their first annual gain after an unprecedented three-year decline, despite a dip on the final trading day. The rally was driven by optimism surrounding policy support, with Hong Kong also seeing gains for the year, ending a period of consecutive losses.
The CSI 300, which tracks the largest companies listed in Shanghai and Shenzhen, rose 14.7% in 2024, breaking a losing streak that began in 2021. This surge reversed the impact of the COVID-19 pandemic, property sector issues, and weak consumer confidence that had weighed heavily on the market. Similarly, the Shanghai Composite Index gained 12.8%, recovering from two years of decline.
Hong Kong’s Hang Seng index ended the year with a slight increase of 0.1% on the final day, concluding 2024 with an annual gain of 17.7%. This marked an end to four consecutive years of losses, signaling renewed investor confidence in the region.
“China’s performance within the equities markets came as a positive surprise to many investors,” analysts from Value Partners noted. They attributed the market’s turnaround to several supportive measures implemented in the second half of the year, including monetary policy adjustments, incentives for the property market, and funding schemes for stock purchases. These policies, according to analysts, exceeded expectations and helped offset ongoing concerns about the economy.
Since September, Chinese authorities have rolled out some of the boldest measures in years, including interest rate cuts, incentives for home purchases, and funding programs aimed at boosting stock market activity. This push to stabilize the capital market has sparked optimism that the market is nearing its bottom, as noted by China Asset Management.
Banking stocks led the onshore market with a 34.7% gain in 2024, as the four largest state-owned banks reached multi-year highs. The chip sector also surged by 53.9%, driven by growing domestic investor interest in local semiconductor makers in response to tightening US chip restrictions.
However, the market ended the year on a weaker note. The CSI 300 dropped 1.6% on the final trading day of 2024, following data showing that China’s factory activity grew at a slower pace in December, amid rising trade risks.
Looking ahead to 2025, analysts suggest that dividend-paying stocks may outperform the broader market in the short term, particularly with potential market disruptions expected from US political developments, including the January inauguration of President-elect Donald Trump.
