Chinese stocks post $1 trillion gain on hopes of reopening and improving US relations

  • Hang Seng rises to its best week since 2011
  • Technology, real estate stocks lead gains
  • Rising yuan, China’s sensitive luxury commodities and stocks

SINGAPORE (Reuters) – Chinese markets jumped and the yuan rose on Friday as nearly $1 trillion added to the value of Chinese stocks in the week, as rumors and news reports raised hopes of easing tensions between the United States and China. Strict COVID rules.

Hang Seng (.HSI) is up 5.3% and has its biggest weekly gain in 11 years. The Shanghai Composite Index (.SSEC) rose 2.4% with a weekly gain of 5.3%, the largest in more than two years, and China’s sensitive assets around the world rose sharply.

Bloomberg News reports that initial US inspections of audit papers at Chinese companies listed in the US – a long-standing point of regulatory tension and risk – ended early, raising hopes that US officials were satisfied.

Unsubstantiated social media posts pointing to a goal to relax COVID rules in March also fueled optimism throughout the week and appeared to gain new momentum on Friday.

Fundamental changes to the country’s non-spreading coronavirus policy are scheduled for the next five to six months, according to a recording of the hearing heard by Reuters, a former senior Chinese disease control official said at a closed conference.

“Any indication that some rules could be relaxed would be an immediate dose of grease in the gears of the Chinese economy,” said Sophie Lund Yates, senior equity analyst at Hargreaves Lansdowne.

The focus now was on a press conference by Chinese health authorities on November 5.

The gains were broad-based, overshadowing the pessimistic mood in global markets about the possibility of US interest rates rising more than previously expected. Real estate and technology stocks led the way.

Online giants Alibaba (9988.HK) and (9618.HK) are up more than 10% and Hang Seng Tech (.HSTECH) is up 7.5%. The property manager Country Garden Services is up 15% and the Mainland Developers Index (.HSMPI) is up 9%.

Hedge fund manager Lei Ming said the reopening rumor is just a catalyst for a rebound in the oversold market.

β€œThe main reason for the market jump is that selling pressure has been exhausted after the market has fallen a lot.”

Gains in value across Hong Kong, Shenzhen and Shanghai during the week were nearly $1 trillion. However, the Hang Seng is down 30% this year against a 24% drop in global stocks (.MIWD00000PUS). The Shanghai Composite is down 15% this year.

A view of a giant display of stock indices, following the outbreak of the coronavirus disease (COVID-19), in Shanghai, China, October 24, 2022. REUTERS/Aly Song/File Photo

The rally extended to commodity markets with iron ore futures rising on Friday, and China sensitive stocks listed in London and Europe.

Mining companies such as Rio Tinto (RIO.L) and Anglo American (AAL.L) have risen sharply along with luxury retailers such as LVMH (LVMH.PA) and Swiss jeweler Richemont (CFR.S).

US-listed Chinese stocks rose in pre-market trading, as KraneShares CSI China Internet ETF and iShares MSCI China ETF (MCHI.O) poised for weekly gains after sharp declines in October.

Strategists at TD Securities continue to anticipate a gradual easing of zero-day restrictions for COVID, warning that markets could be disappointed if investors expect something faster.

Market value of China’s shares

buy rumor

Changes to COVID policies have not been officially flagged. On Tuesday, a spokesman for the Ministry of Foreign Affairs said that he was not aware of the situation, when asked about rumors on social media that China plans to reopen its doors after severe restrictions on the spread of the Corona virus in March.

Bloomberg News also reported on Friday, citing unnamed people familiar with the matter, that China is relaxing rules that penalize airlines for carrying passengers infected with the coronavirus.

A State Department spokesman later said he was not aware of the report and that China’s policies on the coronavirus were consistent and clear.

Nor was the early conclusion of the audits confirmed by Chinese or US officials. However, markets have desperate reasons to rally after the Hang Seng Index hit a 13-year low last month in the wake of the CPC Congress.

“I don’t see anything new that has changed the investment environment in Hong Kong and China,” said Frank Benzemra, head of Asian equity strategy at Societe Generale in Hong Kong.

“The only explanation I have is that the selling was excessive after Congress, the valuation of some of the outside names was very disappointing, and there is some catch on the bottom.”

The currency joined the rally, jumping more than 0.5% to touch a one-week high of 7.2340 per dollar.

Additional reporting by Medha Singh in Bengaluru and Summer Zain in Hong Kong. Written by Tom Westbrook. Editing by Sam Holmes and Sumyadb Chakrabarti

Our Standards: Thomson Reuters Trust Principles.

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