Equities across Hong Kong and China surged after China’s state council vowed to keep its stock market stable amid a historic rout that erased US$1.5 trillion ($2.04 trillion) in value over the past two sessions.
The Hang Seng China Enterprises Index, which tracks mainland companies listed in Hong Kong, jumped as much as 12% on Wednesday, its biggest gain since the global financial crisis. A gauge of Chinese tech firms soared by a record 20%. China’s benchmark CSI 300 Index advanced by 4%. Some of the most beaten-down stocks like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. gained at least 20%.
The eye-watering rally followed a report by the official Xinhua news agency that China will keep the stock market stable and support overseas share listing, citing a meeting chaired by Vice Premier Liu He. The comprehensive statement also sought to resolve other woes that have plagued the market, particularly concerns over Beijing’s tech crackdown, saying a “rectification of major platform companies” should end soon.
Equities in the region have seen intense selling recently amid regulatory fears and speculation that Beijing’s ties with Russia may bring additional US sanctions. Investors had been weighing cheap valuations against lingering risks for tech firms including a possible US delisting of Chinese stocks. A lockdown in tech hub Shenzhen was also weighing on sentiment.
The statement also called for new policies to handle property developers’ risks, as well as a mention that regulators in both countries have achieved positive progress on the issue of Chinese stocks listed in US markets. The report follows a series of articles by state media in recent days seeking to talk up sentiment.
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“Usually the market’s natural bottom comes after the policy bottom, which we are seeing now,” said Li Weiqing, fund manager at JH Investment Management Co. “This time around things may be different, as the rout was looking like a financial crisis; the macro figures are also pointing to a bottom. But even if this is not the end, we can at least expect more stability in the next week or so.”
Even with the latest bounce, some market watchers say it’s too early to call an end to the rout. JPMorgan Chase & Co. earlier this week labelled some Chinese internet names as “uninvestable” in the short term.
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The 10-day volatility of the Hang Seng Index is higher than any major stock market benchmarks in the world, Bloomberg data shows. Meanwhile, short sell turnover in Hong Kong shares accounted for more than 20% of total equity trading on Monday morning, the highest since late January, according to data compiled by Bloomberg.
“Personally I fear that the crisis the market faces is not just about China, it’s a global issue, and not just something that regulators can solve with this,” said Wang Mingxuan, fund manager at Quant Technology Investment. “The calm this brings is just the calm before the storm.”
Photo: Bloomberg
