China’s stock benchmark halted a three-day rout as the state media sought to reassure investors shaken by Beijing’s regulatory crackdown.
The CSI 300 Index ended 0.2% higher after a volatile session that saw it swing between gains and losses more than a dozen times. The Hang Seng Index was up 1.4% as of 3.59 pm in Hong Kong after falling as much as 1% earlier, which took declines from its recent Feb 17 peak to 20% and put it on course for a bear market.
Chinese state media talked up the market after a wave of selling that had seen nearly US$1.5 trillion ($2.04 trillion) of market value wiped off Hong Kong and mainland shares in the three trading days through Tuesday, according to Bloomberg-compiled data. Investors have dumped stocks in the crosshairs of Beijing’s sweeping regulatory crackdowns, with selling also spreading to bond and currency markets.
“China’s ‘national team’ may be getting ready to ‘stabilize’ markets,” Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte., wrote in a note. “It is doubtful, though, that the repricing of China equities for government regulatory risk has run its course.”
Meituan, which had seen its stock hammered amid China’s new regulations on the food delivery sector, was up 7.3%. Tencent Holdings Ltd. was down 0.1% after plunging 9% on Tuesday. The Hang Seng Tech Index was up 2.8%.
Recent declines are unsustainable and the market will stabilize quickly, the Securities Daily reported, citing fund managers. The slump has “to an extent, reflected the misreading of policies and venting of sentiment by some funds,” wrote the Securities Times in a front page editorial, adding that economic fundamentals are unchanged and the market may stabilize at any time.
Panic Selling
The jawboning follows dramatic market moves this week that underscored the fragility of investor confidence amid a months-long regulatory onslaught by Beijing. Traders fear the latest crackdown on the education, tech and property sectors could expand to other industries such as health care, as China looks to tighten its grip on Big Tech and reduce the wealth gap. The government has targeted private enterprises it blames for exacerbating inequality and increasing financial risk.
“There are still pockets of stocks to buy in China and we shouldn’t turn our backs on the market given its size, breadth and growth,” Lorraine Tan, Morningstar’s director of equity research for Asia, wrote in emailed comments. “I’d prefer to suggest that investors look at government-promoted sectors and/or industries that are already competitive and switch to those names.”
Elsewhere, the China Securities Journal echoed other publications in saying there was no systemic risk, and cited domestic mutual and private fund managers saying that there is no need for investors to be overly pessimistic. The Shanghai Securities News also carried a piece citing analysts that the decline has brought buying opportunities in quality stocks.
“There has been panic in some sectors more than others in recent days, and the important thing is to keep emotions in check,” said Du Kejun, fund manager at Beijing Gelei Asset Management Center LP, adding that he would consider buying EV firms and chipmakers if the dip continues.
Photo: Bloomberg
