- Hang Seng climbs to best week since 2011
- Tech and real estate stocks lead gains
- Yuan, commodities, China-sensitive luxury stocks rise
SINGAPORE, Nov 4 (Portal) – Chinese markets surged and the yuan surged on Friday, boosting the value of Chinese stocks by about $1 trillion on the week, as rumors and news raised hopes of a double détente of US-China tensions and China fueled strict COVID rules.
The Hang Seng (.HSI) rose 5.3%, posting its biggest weekly gain in 11 years. The Shanghai Composite (.SSEC) rose 2.4% for a 5.3% weekly gain, the largest in more than two years, and China-sensitive assets around the world surged.
Bloomberg News reported that initial US inspections of audit papers at US-listed Chinese companies – a longstanding point of regulatory tension and risk – ended ahead of schedule, raising hopes that US officials were satisfied.
Unfounded social media posts pointing to the goal of easing COVID rules in March have also fueled optimism throughout the week and appeared to gain renewed momentum on Friday.
A former top Chinese disease control official said at a closed-door conference that significant changes to the country’s zero-COVID policy would take place over the next five to six months, according to a recording of the meeting heard by Portal.
“Any indication that some rules might be relaxed would be an instant dose of lubricant in the shattering cogs of the Chinese economy,” said Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown.
The focus was now on a press conference by the Chinese health authorities on November 5th.
The gains were broad-based, overshadowing a bearish mood in global markets on the prospect of US interest rates rising further than previously expected. Real estate and technology stocks led the way.
Shares in online giants Alibaba (9988.HK) and JD.com (9618.HK) are each up more than 10%, and the Hang Seng Tech Index (.HSTECH) is up 7.5%. Property manager Country Garden Services rose 15% and an index of mainland developers (.HSMPI) rose 9%.
Hedge fund manager Lei Ming said the reopening rumor is just the catalyst for a rebound in an oversold market.
“The main reason for the market jump is that the selling pressure was exhausted after the market fell so much.”
Gains in Hong Kong, Shenzhen and Shanghai are about $1 trillion for the week. However, the Hang Seng remains down 30% this year while global equities (.MIWD00000PUS) fell 24%. The Shanghai Composite is down 15% this year.
The rally extended to commodities markets, with iron ore futures higher on Friday and China-sensitive stocks listed in London and Europe.
Miners like Rio Tinto (RIO.L) and Anglo American (AAL.L) surged along with luxury retailers like LVMH (LVMH.PA) and Swiss jeweler Richemont (CFR.S).
US-listed Chinese stocks rose sharply in premarket trading, with KraneShares CSI China Internet ETF and iShares MSCI China ETF (MCHI.O) set for weekly gains after sharp falls in October.
Strategists at TD Securities continue to expect a gradual easing of zero-COVID restrictions and warn that if investors expect something faster, markets could be disappointed.
Market capitalization of Chinese stocks
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Changes to the COVID guidelines have not been officially flagged. A Foreign Ministry spokesman on Tuesday said he was unaware of the situation when asked about rumors on social media that China was planning to reopen strict COVID restrictions in March.
Bloomberg News reported on Friday, citing unnamed people familiar with the matter, that China was working on relaxing rules penalizing airlines for boarding COVID-positive passengers.
A Foreign Ministry spokesman later said he was unaware of the report and that China’s COVID policy was consistent and clear.
A premature completion of the audit reviews was also not confirmed by Chinese or US officials. Still, markets have desperate reasons to rebound after the Hang Seng hit a 13-year low in the wake of the Chinese Communist Party Congress last month.
“I don’t see anything new that has changed the investment landscape in Hong Kong and China,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong.
“The only explanation I have is that the post-Convention sell-off has been excessive, valuations of some offshore names have taken a hit and there is some bottom fishing.”
The currency joined the rally, gaining more than 0.5% to a one-week high of 7.2340 per dollar.
Reporting by Medha Singh in Bengaluru, additional reporting by Summer Zhen in Hong Kong. Written by Tom Westbrook. Edited by Sam Holmes and Saumyadeb Chakrabarty
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