Xi spurs frantic stock buying with lifeline for China markets
BNN Bloomberg
After a brutal 12 months for Chinese equities, Wednesday’s session was looking like a tepid bounce off multi-year lows until the headlines started rolling from Beijing. Then greed quickly replaced the panicked selling of the past few days.
After a brutal 12 months for Chinese equities, Wednesday’s session was looking like a tepid bounce off multi-year lows until the headlines started rolling from Beijing. Then greed quickly replaced the panicked selling of the past few days.
In a brief statement carried by state media, China’s top financial policy body vowed to ensure stability in capital markets, support overseas stock listings, resolve risks around property developers and complete the crackdown on Big Tech “as soon as possible.” Yi Gang, governor of the People’s Bank of China, followed with a statement saying the central bank would help implement the policies, as did the banking watchdog.
While the pledges from President Xi Jinping’s government offered little clarity over what authorities may do to achieve their goals, it was the first time China publicly addressed investors’ top concerns in one coordinated swoop. The move underscored Xi’s focus on ensuring economic and financial stability before a Communist Party congress at which he’s expected to secure at least another five years in power.
By the time trading ended just after 4 p.m. local time on Wednesday, the Hang Seng China Enterprises Index was up 12.5 per cent in its best session since October 2008. Alibaba Group Holding Ltd. surged 27 per cent, while JD.com Inc. jumped 36 per cent. Property stocks rallied the most in more than a decade.
“It’s the end of capitulation,” said Peter Garnry, head of equity and quantitative strategy at Saxo Bank. “This confirms that the Chinese government sees healthy and strong equity markets as key for the country going forward. The equity market is totally sentiment driven right now and everyone is looking for an excuse to buy, though the headwinds for Chinese equities are still enormous.”
