Tech stocks led to a violent rebound in Chinese markets, with some Hong Kong stocks jumping more than 30% as investors took advantage of favorable comments from key Chinese economic policy makers.
The speech by President Xi Jinping’s economic czar, Vice Premier Liu He, and his colleagues directly addressed many of investors’ major concerns. It helped Chinese equities post three days of heavy losses, with Hong Kong’s leading benchmark staging its largest one-day rally since the global financial crisis.
Chinese equities have been falling sharply over the past few days. Investors are concerned about a number of problems, including the US delisting, tensions with the US, China’s escalating battle against Covid-19, and Beijing’s long string of regulatory crackdowns.
Among other things, Chinese officials said they would introduce market-friendly policies and make the capital market run smoothly, China’s state-owned news agency Xinhua said. Attendees at a meeting chaired by Mr. Liu also said that any policy that could shift markets should be developed in coordination with financial regulators, Xinhua said.
The report, released during trading hours on Wednesday in Hong Kong, helped push the city’s flagship Hang Seng Index up 9.1%, the largest one-day percentage increase since late 2008.
The Hang Seng Tech Index jumped 22%, recovering most of the losses from the past three sessions, with industry heavyweights Alibaba Group Holding Ltd. and Tencent Holdings ltd.
jumping respectively 27% and 23%.
In mainland China markets, the Shanghai and Shenzhen benchmark indices gained 3.5% and 4% respectively.
Shares of US-listed Chinese companies also rallied on Wednesday, with US shares in Alibaba up 37%, JD.com Inc.
up 39% and Tencent Music Entertainment Group up 29%.
The Nasdaq Golden Dragon China Index, which includes U.S.-listed companies focused on China, was up 33%.
Some market participants highlighted comments saying the regulatory process should be “transparent and predictable” and suggesting that Beijing’s crackdown on the country’s large internet platforms should be completed as soon as possible. A flurry of punishments and new regulations, plus the prospect of further sanctions for companies including Tencent Holdings, has been holding back China’s internet equities for more than a year.
Investors were increasingly concerned that this campaign could last several more months, and Xinhua’s statement was very helpful in terms of sentiment, said Elizabeth Kwik, director of Asian equities investment at Abrn..
The demand for transparent and predictable regulation has reduced concerns about surprise fines or new regulations, he said.
Some previously massively sold Chinese tech stocks have soared. The Hong Kong-listed shares of Meituan and JD.com rose more than 30% each.
China’s securities regulator is maintaining good communications with its US counterparts and is working to cooperate on the accounting oversight of US-listed Chinese companies, Xinhua added. The looming threat of Chinese companies being kicked off US exchanges as soon as 2024 was a major trigger for the recent selloff.
The People’s Bank of China, the country’s banking and insurance regulator, and the securities regulator have added their support in separate statements that outlined various pro-market and growth-friendly measures.
Chinese officials sometimes take action to bolster market sentiment. At the end of 2018, for example, Liu and others called for confidence in China’s economic prospects, helping to revive the market.
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