Equities in China and Hong Kong gained as declining virus cases on the mainland boosted sentiment and triggered dip-buying in the region’s battered stock market.
The benchmark CSI 300 Index closed up 1.4% on Wednesday, adding to its 1.1% rise from the previous session. Stocks also climbed in Hong Kong, where a gauge of Chinese tech firms jumped 2.9% to snap a five-day losing streak.
The advance was driven by signs that China’s virus outbreak may be easing. Shanghai reported a 51% drop in new coronavirus infections on Tuesday from a day earlier, with zero cases found in the community. That moved the city closer to meeting a threshold for a relaxation of growth-crippling Covid restrictions.
“A drop in Covid cases in Shanghai and increased expectations of policy impetus to buoy growth in the second half are factors working together at this stage,” said Du Kejun, partner at Beijing Gelei Asset Management Center Limited Partnership. “Longer-term funds could be buying the dip, while short-term money could also be getting more active to trade a technical bounce.”
The nascent rebound is once again spurring hopes that the worst may be over for Chinese equities after a months-long selloff triggered by Covid lockdowns, regulatory crackdowns, and rising global interest rates. Policy measures and vows of market stability from authorities since mid-March have so far brought only fleeting gains.
Data released early Wednesday showed China’s consumer prices rose 2.1% last month from a year earlier, which is stronger than expected but still lower than hot inflation readings elsewhere. This suggests “China is in a very sweet spot at the moment,” wrote Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte., adding that this gives room for policymakers to unleash “some juicy stimulus.”
China’s onshore market has solid foundation for stable operation, according to a CCTV report on Tuesday, citing the China Securities Regulatory Commission. Also adding to the buoyant sentiment is President Joe Biden’s comment that he and his advisers are weighing whether to cut US tariffs on foreign imports to fight inflation.
“The latest remark from CSRC, coupled with Covid situation in Shanghai, which seems to be more in control, and report of potential tariff relaxation from the US, may have boosted today’s sentiment,” said Kevin Li, fund manager at GF Asset Management (Hong Kong) Ltd.
China’s smaller, tech-heavy ChiNext Index gained 3.1%. In Hong Kong, the benchmark Hang Seng Index climbed 1%. Gains across the region were stronger earlier, with the rally cooling near market close as some profit-taking took place.
中国规模较小、以科技股为主的创业板指数上涨 3.1%。在香港，恒生指数上涨 1%。该地区早些时候的涨幅更大，随着一些获利了结出现，涨势在收盘附近降温。
The onshore yuan also rose 0.1% against the dollar, snapping a four-day losing run, after the central bank set a stronger-than-expected yuan fixing rate.
China equities appear to be nearing the late stage of a bear market but the final leg will be bumpy, Morgan Stanley strategists wrote in a note, sticking to their equal-weight rating for now.
Near-term volatility will remain elevated, given the uncertainties surrounding China’s Covid situation, global macro slowdown, and monetary tightening, strategists including Laura Wang wrote. Down almost 20%, the CSI 300 is still one of the world’s worst-performing major national equity benchmarks.
包括 Laura Wang 在内的策略师写道，鉴于围绕中国新冠肺炎疫情、全球宏观经济放缓和货币紧缩的不确定性，近期波动性仍将居高不下。沪深 300 指数下跌近 20%，仍是全球表现最差的主要国家股票基准之一。
“More people are ready to bottom fish” given that losses have been so excessive, said Huang Yuhang, a fund manager at Lanqern Capital Management Co.