- Hang Seng achieves its best week since 2011
- Technology and real estate stocks lead the gains
- Yuan, Commodities and China-Sensitive Luxury Stocks Rise
SINGAPORE, Nov 4 (Reuters) – Chinese markets soared and the yuan rose on Friday, with around $1 trillion added to the value of Chinese stocks in a week, as rumors and reports fueled hopes of a double relief of US-China and China tensions. strict COVID rules.
The Hang Seng (.HSI) jumped 5.3% and posted its biggest weekly gain in 11 years. The Shanghai Composite (.SSEC) rose 2.4% for a weekly gain of 5.3%, the biggest in more than two years and China-sensitive assets around the world rose sharply.
Bloomberg News reported that the first US inspections of audit documents of Chinese companies listed in the United States – a long-standing point of regulatory tension and risk – ended in advance, raising hopes that US officials were satisfied.
Unsubstantiated social media posts signaling a target for relaxing COVID rules in March also fueled optimism all week and appeared to gain further momentum on Friday.
A former top Chinese disease control official told a closed-door conference that substantial changes to the country’s zero COVID policy were to take place within the next five to six months, according to a recording of the session heard by Reuters .
“Any indication that some rules might be relaxed would be an immediate dose of grease in the jarring workings of the Chinese economy,” said Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown.
The focus was now on a press conference by Chinese health authorities on November 5.
Gains were broad, eclipsing a pessimistic mood in global markets over the prospect of a bigger-than-expected US interest rate hike. Real estate and technology stocks led the way.
Shares of online giants Alibaba (9988.HK) and JD.com (9618.HK) each rose more than 10% and the Hang Seng Tech index (.HSTECH) rose 7.5%. Property manager Country Garden Services rose 15% and a mainland developer index (.HSMPI) rose 9%.
Hedge fund manager Lei Ming said the rumored reopening was just the trigger for a rebound in an oversold market.
“The main reason for the market jump is that the selling pressure had exhausted after the market fell.”
Value gains in Hong Kong, Shenzhen and Shanghai over the week are around $1 trillion. However the Hang Seng remains down 30% this year against a 24% drop in global equities (.MIWD00000PUS). The Shanghai Composite is down 15% this year.
The rally extended to commodity markets with iron ore futures rising on Friday and China-sensitive stocks listed in London and Europe.
Minors such as Rio Tinto (RIO.L) and Anglo American (AAL.L) rose sharply, along with luxury retailers like LVMH (LVMH.PA) and Swiss jeweler Richemont (CFR.S).
U.S.-listed Chinese stocks surged in early trading, with the Nasdaq Golden Dragon China Index (.HXC) on track for its best week in eight months after its worst monthly performance on record in October.
TD Securities strategists continue to expect a gradual easing of zero-COVID restrictions, warning that markets could be disappointed if investors expect something faster.
BUY THE RUMOR
Changes to COVID policies have not been officially reported. A Foreign Ministry spokesman said on Tuesday he was unaware of the situation, when asked about social media rumors that China was planning a reopening of strict COVID restrictions in March.
Bloomberg News also reported Friday, citing unnamed people familiar with the matter, that China is working to relax rules that penalize airlines for carrying COVID-positive passengers.
A Foreign Ministry spokesperson later said he was unaware of the report and that China’s COVID policies were consistent and clear.
An early conclusion of the audit checks has also not been confirmed by Chinese or US officials. Yet markets have desperate reason to rally after the Hang Seng hit a 13-year low last month following the Chinese Communist Party Congress.
“I don’t see anything new that has changed the investment environment 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 it has been oversold after Congress, the valuation of some offshore names has been very distressed and there is some bottom fishing.”
The currency joined the rally, hitting 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. Editing by Sam Holmes and Saumyadeb Chakrabarty
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