Hong Kong: Stocks soar as China pledges support
[HONG KONG] Hong Kong stocks soared on Wednesday (Mar 16) after Chinese authorities pledged much-needed support to beaten-down markets.
The official Xinhua news agency said authorities would maintain capital market stability and adopt measures to handle risks for troubled property developers.
The news lit a fire under Hong Kong's Hang Seng Index, where mainland Chinese tech firms had been reeling from a sell-off this year fuelled by a government crackdown on the sector.
The Hang Seng Index rocketed 9.08 per cent, or 1,672.42 points, to close at 20,087.50.
The Shanghai Composite Index climbed 3.48 per cent, or 106.75 points, to 3,170.71, while the Shenzhen Composite Index on China's second exchange rose 3.62 per cent, or 72.88 points, to 2086.24.
The government guidance was announced after a committee meeting under China's State Council chaired by Vice Premier Liu He, Xinhua reported.
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The meeting stressed the need to "effectively support the economy in the first quarter", adding that monetary policy should be proactive and new loans should grow appropriately.
In the real estate sector, authorities should also propose "effective response plans to prevent and defuse risks", the meeting found, according to the agency.
Traders pounced on the report to snap up beaten-down firms that have been hit by concerns about regulatory crackdowns by Chinese and US authorities.
The Hang Seng Tech Index soared a record of more than 20 per cent higher, while Alibaba, Tencent and NetEase were up more than 20 per cent, with JD.com, XD Ince and Meituan spiking about a third.
Troubled property giant China Evergrande jumped more than 10 per cent.
"Usually the market's natural bottom comes after the policy bottom, which we are seeing now," Li Weiqing at JH Investment Management Co said.
"This time around things may be different, as the rout was looking like a financial crisis; the macro figures are also pointing to a bottom. But even if this is not the end, we can at least expect more stability in the next week or so." The news will provide some much-needed relief to investors in the city after they suffered an eye-watering sell-off sparked by concerns over the Ukraine war and prospects for a series of interest rate hikes by the US Federal Reserve.
News that the southern Chinese tech hub of Shenzhen had been put into lockdown to fight a Covid-19 outbreak compounded the crisis for the sector, while fears about possible US sanctions if China were to help Russia in its war with Ukraine also helped fuel the selling.
The rally has helped pare some of the huge losses that the firms have endured so far this year. Alibaba and JD.com are still down around 20 per cent since the end of December, while XD is less than half its value back then.
But while the rally was much needed, there are fears that the selling has not finished yet.
"Personally I fear that the crisis the market faces is not just about China, it's a global issue, and not just something that regulators can solve with this," Wang Mingxuan of Quant Technology Investment said.
"The calm this brings is just the calm before the storm." Recent lockdowns and restrictions to curb a coronavirus surge in China have hit almost every region of the country, including manufacturing hubs, financial centres and port cities.
China set its lowest annual GDP target in decades this month, with Premier Li Keqiang warning of a "grave and uncertain" outlook. AFP
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