China’s stocks are crazy over-entering with the worst hope over

(Bloomberg) – After nearly two years of disappointment and $6 trillion in losses, speculation that a bottom in Chinese stocks has finally arrived is setting the stage for a massive rally around the world this week.

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A flurry of market-friendly headlines – coupled with unverified talk that China is ready to break free of its strict Covid Zero policy – sent the Hang Seng China Enterprise Index into the good week. the highest since 2015. Led by tech names, the index skyrocketed. up to 8.8% on Friday, as Bloomberg News reported progress in efforts to prevent the delisting of hundreds of Chinese stocks from US exchanges.

While similar rallies have all failed in recent months, bulls are betting that some of the world’s lowest valuations have given Chinese stocks a chance to rise on any given occasion. What a good sign. The risk is that they could get ahead of themselves, especially after the nation’s top health authority reaffirmed its commitment to Covid Zero.

“It seems like the markets are looking for a lot of positive news – big or small,” said David Chao, global market strategist for Asia Pacific – Japan at Invesco Ltd. as a potential catalyst for Chinese stocks.” In terms of valuations and a lot of bad news being put on these stocks, investor sentiment is heading for the upside rather than for the downside. “

Rumor makers have infused strong optimism into the roiling markets in China, where traders are looking for reasons to buy shares. November looked like a game changer after four straight months of losses in major indexes culminating in President Xi Jinping’s takeover at the Communist Party congress that spoiled investors.

Having recovered about 10% this week, Hong Kong’s benchmark Hang Seng index is set for its best gain since 2011. The CSI 300 index, the benchmark for mainland stocks, also gained more than 3% on Friday.

Hopes of a possible reopening were further boosted when a Bloomberg News report on Friday said China was working on a plan to scrap a system that penalizes airlines for bringing in virus cases. into this country. Stocks involved in reopening, such as Li Ning Co. and Haidilao International Holding Ltd., were among the strong gainers in the market.

Internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. are all up at least 10% in Friday’s trading session. People familiar with the matter told Bloomberg News that dozens of inspectors from the US Corporate Accounting Oversight Board will leave Hong Kong as soon as this weekend, earlier than originally scheduled for mid-November, people familiar with the matter said. with the matter told Bloomberg News, requesting anonymity because the information is private. .

Willer Chen, an analyst at Forsyth Barr Asia Ltd., said: “With a lot of positive talk in the market, the indices are having a mild recovery. Nothing is confirmed but people are buying on those tips.”

Optimism spread to money markets, with the offshore yuan rising more than 1%. Dollar bonds held by Chinese tech companies have also sold off in recent weeks, but their spreads tightened by about 10 basis points on Friday, according to credit traders.

READ: Important meetings to give clues on China’s economic development path

– With support from Abhishek Vishnoi, Dorothy Chan, Charlotte Yang and John Cheng.

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