Chinese stocks climbed, adding to Wednesday’s stunning surge, as Beijing’s strong push to stabilize financial markets lures buyers back after a relentless equity selloff.
The Hang Seng China Enterprises Index was up 5.6% as of 10:58 a.m. in Hong Kong, with technology and property shares among the top gainers after officials promised to ease a regulatory crackdown and pledged support for companies in the sectors. On Wednesday, the gauge of Chinese firms listed in the Asian financial hub posted its biggest advance since 2008.
While Beijing’s vows have spurred a sharp turnaround for equities after what seemed like a bottomless decline, investors are debating how sustainable this rebound can be. A relaxation of China’s stringent Covid-linked curbs and specific measures within the tech and real estate sectors are what some want to see before being convinced that the relentless rout has ended.
China watchers keen to know if the stock market has turned a corner
“In the short term, it’s fund flow and liquidity that’s driving up the whole market, on the back of such a cheap valuation level,” said Kenny Wen, a strategist at Everbright Sun Hung Kai Co. “But whether the market can keep rallying is really up to the regulatory environment and corporate earnings recovery story.”
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The Hang Seng Tech Index was up 5.9% after a dizzying 22% gain on Wednesday. Still, the gauge is down almost 60% from its February 2021 peak owing to a yearlong crackdown on the sector.
Meanwhile, the US accounting watchdog insisted on Wednesday that Beijing should provide complete access to audits of Chinese companies that trade in New York, suggesting the risk of delisting from American exchanges -- a key concern for investors -- still lingers.
“Tech will keep recovering but it remains challenging for them to recover to the previous levels, given the shifted regulatory regime in general,” Wen said.
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Real Estate
A Bloomberg Intelligence measure of Chinese property developers climbed 10% after a similar advance in the previous session. Chinese junk-rated dollar bonds, dominated by builders, jumped 2 cents on the dollar this morning, a relatively muted move given more than half of junk-rated developers are trading at less than 50 cents.
More broadly, China’s benchmark CSI 300 Index was up 2.5% while the Hang Seng Index jumped 5%. The gains also came amid a broad rally in global equities after the Federal Reserve hiked rates as expected and Chair Jerome Powell assured that the US economy won’t tip into recession.
A measure of US-listed Chinese shares soared the most since at least 2001 overnight.
Photo: Bloomberg
