(Yicai) Nov. 11 -- Analysts are optimistic about China’s latest debt restructuring initiative for local governments, expecting it to enhance stock market valuations and stimulate the bond market in the near term.

The scale of the debt package exceeds expectations, sending a slightly positive signal for the stock market, predicted to stay strong, several Chinese brokerages wrote in reports after the Standing Committee of the 14th National People's Congress of China on Nov. 8 approved a proposal to raise local governments' debt ceiling by CNY6 trillion (USD835 billion) to replace hidden debts.

In addition to the debt ceiling increase, China will allocate CNY800 billion (USD111.3 billion) annually from new special-purpose bonds to relieve local government debt, cumulatively reaching CNY10 trillion (USD1.39 trillion), a sum proposed by Finance Minister Lan Fo'an earlier. Moreover, Lan emphasized that CNY2 trillion in debts due from 2029 onward, related to shantytown redevelopment, will be repaid under the original contracts.

This policy marks the most significant debt support measure in recent years and is a timely intervention, said Li Chao, chief economist at Zheshang Securities. "It has a positive effect on elevating market risk appetite, particularly highlighting decision-makers' determination to use policy tools to control risks."

Deng Lijun, chief strategy analyst at Huajin Securities, noted that the debt plan is generally positive for A-shares in the short term and could enhance valuations in the medium to long term, potentially laying the groundwork for a bull market.

Regarding the bond market, Liao Zhiming, chief fixed income analyst at Huayuan Securities, said that the plan removes policy uncertainty. "In the short term, we are clearly bullish on the bond market, especially on credit bonds, which have seen significant adjustments in the past three months."

Qin Han, chief fixed income analyst at Zheshang Securities, said that the measures meet expectations, supporting long positions in the bond market.

Editor: Emmi Laine