**Chinese Stock Markets Surge Then Cool as Investors React to Stimulus Plans**

China's stock markets soared to their highest levels in over two years after returning from a week-long holiday, but quickly cooled off as investors remain undecided about the efficacy of Beijing's latest economic stimulus measures. Meanwhile, Hong Kong's Hang Seng Index, which had been enjoying a significant rally, experienced its heaviest fall since 2008, closing 9.4% lower on Tuesday.

Zheng Shanjie, chairman of China's economic planning body, sought to reassure the public by expressing confidence in meeting the country’s economic targets for 2024. He announced that China would pull forward 200 billion yuan ($28.36 billion) from next year's budget to invest in infrastructure and support local governments. However, investors were left unconvinced due to the lack of substantial new measures, reigniting doubts about the government's commitment to revitalizing the world's second-largest economy amid its most severe downturn since the global pandemic.

The Shanghai Composite closed 4.6% higher, and the blue-chip CSI300 index saw a 5.9% rise by the end of the day. Although these are sizable gains, they were below the more than 10% increases seen earlier in the day, which witnessed record-breaking turnover of 3.45 trillion yuan.

Hope for a sustained rally hinges on more extensive fiscal policies and further measures to support the economy and the struggling property market, according to Vasu Menon, managing director of investment strategy at OCBC in Singapore. The need for additional government action is crucial, especially after the spectacular rally seen in recent weeks.

Global markets felt the ripple effects, with China-exposed assets experiencing a downturn. The Australian dollar fell by 0.5%, while the yuan prepared for its most significant drop in 10 months. Industrial metals like iron ore and copper also saw substantial declines, affecting global mining giants such as Rio Tinto and BHP, and causing European miners to suffer their biggest daily fall in 18 months.

Even as China introduced its most aggressive stimulus measures since the pandemic, which saw the CSI300 gain 25% over five sessions prior to the Golden Week break, the lack of detailed new policies left markets unsure. Flows on Tuesday targeted broad index funds and market segments expected to gain from government support, leading to nearly 20 exchange-traded funds trading at a premium exceeding 20% of their asset value by midday.

Veteran investor Wen Hao interprets the record turnover as a combination of massive profit-taking and fresh money inflow. Despite the day's volatility, he remains optimistic about the bull market's early stage and suggests that it’s still an opportune time to invest in stocks, particularly small-cap companies which often outperform blue-chips in a strong market.

On Tuesday, smaller companies outperformed their larger counterparts, with tech hardware makers, brokers, health care companies, and builders leading the gains. The CSI semiconductor sub-index surged 17%, while a brokers' sub-index rose by 10.6%. Thematic indexes in sectors such as biotechnology, defense, and electric vehicles climbed more than 11%.

Contrarily, Hong Kong saw a dramatic decline in mainland property developers' stocks, which plummeted 15.5%, marking the largest one-day percentage drop on record. Analysts suggest that this sell-off was a result of profit-taking following recent gains, rather than a broader shift in market sentiment. According to Sean Teo, a sales trader at Saxo in Singapore, the underperformance might be due to investors shifting their funds from Hong Kong to Chinese mainland markets, where the impact of government stimulus is more direct.