Chinese stocks jump after State Council pledges to support economy and capital markets

SHANGHAI (Reuters) – Shares in Hong Kong jumped 9% on Wednesday to mark their best day since 2008, after China’s top policymaker assured markets of stability and support and helped put a floor under sectors hit by a regulatory repression.

Vice Premier Liu He said Beijing would deploy support for the Chinese economy and be cautious with measures for capital markets.

Xinhua news agency also quoted Liu as saying at a meeting of the Financial Stability and Development Committee under the State Council that regulators would coordinate better with their counterparts in Hong Kong.

The comments came a day after Chinese stocks fell to 21-month lows and mainland companies listed in Hong Kong hit 2008 lows.

Chinese stocks have been hit this year by rising domestic COVID-19 cases, fears of a backlash on China over its relationship with sanctions-hit Russia and continued regulatory repression. , including the risk that more mainland companies will be delisted from US stock exchanges.

Liu’s assurances helped the Hang Seng Index recover all the ground lost on Tuesday and more. The HSI jumped more than 9% to surpass the 20,000 mark.

The Hang Seng Tech index posted its biggest daily gain of 22%, recovering much of the ground it had given up since March 10 as regulatory fears mounted.

“It’s quite positive, at least for now, as Liu has addressed some key market concerns, particularly around regulatory repression,” said Ting Lu, chief China economist at Nomura. “Liu is also asking the PBOC to take action, so I think the PBOC will do some easing in the next two months.”

The blue-chip CSI300 index gained the most since July 2020, up 4.3%, while the Shanghai Composite index added 3.5% and the Hong Kong-listed Chinese corporate index gained 12.5%.

The CSI300 was down 19% year-to-date through Tuesday’s close.

Among Hong Kong’s index heavyweights, Meituan jumped 32.1%, while Tencent Holdings and Alibaba Group soared 23% and 27% respectively, posting their biggest daily gains. Other stocks caught in the crosshairs of Chinese regulation, such as education, also rallied, with New Oriental Education & Technology Group up 37%.

Liu’s comments also helped ease concerns that encouraging economic data for January and February was leading to complacency among policymakers in Beijing.

The central bank surprised markets on Tuesday by failing to cut one of its key policy rates, despite mounting risks to the economic outlook, including rising COVID-19-related disruptions, rising global risks from the Ukrainian conflict and the weakness of the real estate market.

Liu also said China was encouraging long-term institutional investors to increase their equity holdings.

“It is quite reasonable for the Chinese government to intervene properly, maintain the basic stability of the stock market and avoid further decline,” said Zhang Ming, deputy director of the Academy’s Institute of Finance and Banking. Chinese Social Sciences, in a note. tuesday.

Zhang said this series of declines occurred against a very complex backdrop, hit by “external geopolitical shocks, Sino-US play and malicious short selling by international investors.”

JPMorgan Chase & Co on Monday downgraded 28 Chinese stocks listed in the United States and Hong Kong, citing “China’s geopolitical risks” as “more countries and companies impose sanctions on Russia.”

“Chinese tech stocks are supported by value, while Liu’s speech sparked the rebound,” said Xie Chen, fund manager at Shanghai Jianwen Investment Management Co.

However, Lu de Nomura said markets may continue to worry about China’s isolation due to the Russian-Ukrainian war.

“One meeting cannot solve all the problems, given that the economy is not in good shape,” said Yin Peixin, vice chief investment officer at RBH (Shanghai) Asset Management Co.

The jump in Chinese stocks boosted broader Asian markets, which also benefited from comments by Ukrainian President Volodymyr Zelenskiy on Wednesday that peace talks seemed more realistic but needed more time.

The Chinese yuan also reacted to Liu’s comments and strong stock market rallies. The yuan extended its early gains and hit a high of 6.3460 to the dollar at one point in the afternoon session, up nearly 0.4%.

Mainland China reported 1,952 new confirmed cases of COVID-19 on March 15, the national health authority said Wednesday, rising from a two-year high to 3,602 a day earlier.

A recent spike in infections had raised concerns about the rising economic costs of its tough measures to contain the disease.

Later on Wednesday, the Xinhau news agency reported that China was suspending a trial property tax project this year, citing the Ministry of Finance.

The real estate sector, a key driver of economic growth, slumped as Beijing’s campaign to reduce high debt levels sparked a liquidity crunch among some major property developers, leading to bond defaults and projects suspended or left unfinished.

(Reporting by Jason Xue, Samuel Shen and Andrew Galbraith, additional reporting by Winni Zhou; Editing by Kim Coghill, Vidya Ranganathan and Subhranshu Sahu)