By Lisa Pauline Mattackal and Purvi Agarwal
(Reuters) -U.S.-listed shares of Chinese firms and China-focused funds jumped on Friday and are set for another day of strong gains, aided by the latest in a line of aggressive stimulus measures to propel economic growth in the world's second-largest economy.
The People's Bank of China (PBOC) has lowered interest rates and reduced the amount of cash banks must hold as reserves by 50 basis points.
Reuters reported that in the coming weeks, cities Shanghai and Shenzhen are planning to lift key home purchase restrictions in the coming weeks, with more fiscal measures expected to be announced.
The U.S. listing of Chinese e-commerce giants Alibaba (NYSE:BABA) Group rose 3.1%, while JD (NASDAQ:JD).com and PDD Holdings were up 3.9% and 5.8%, respectively.
Chinese electric-vehicle maker Nio (NYSE:NIO) gained 6.2%, gaming company Bilibili (NASDAQ:BILI) rose 5.4% and search engine giant Baidu (NASDAQ:BIDU) jumped 4%.
Exchange-traded funds tracking the China market also jumped as domestic stocks notched their best week since 2008.
The iShares MSCI China ETF rose 1.6% to its highest since February 2023, while the tech-focused KraneShares CSI China Internet ETF rose nearly 4%.
If gains hold, the MCHI fund is on track to gain nearly 20% this week, its best since its launch in 2011, while KWEB is on track to rise over 26%, its biggest weekly gain in over two years.
Short-covering may also be behind gains this week, said Joe Saluzzi, co-head of equity trading at Themis Trading, as traders betting the shares would fall buy the stock to close those positions.
Still, many analysts question whether the stimulus measures are enough to renew the interest in China, formerly one of the world's top growth stories, as deflationary pressures, weak consumer demand and a severe downturn in the property market have kept investors cautious.
"Chinese equities, China-plays and other pro-cyclical assets are likely to post further tactical gains," said analysts at BCA Research. "However, the implications for the Chinese economy remain unclear at the current juncture."
Shares had rallied on Tuesday after the PBOC launched its biggest easing measures since the pandemic, but retreated on Wednesday as investors questioned whether the measures were sufficient.
Pledges from policymakers for necessary fiscal stimulus to meet this year's 5% growth target, however, appeared to allay certain concerns.