Chinese tech stocks in Hong Kong soar by record as Beijing pledges support for troubled markets
- Hang Seng Index heads for biggest jump since April 2009 while the Tech Index logs the best day since its inception in July 2020
- A State Council committee pledges to ensure market stability, Xinhua reports, after a rout in offshore Chinese stocks infected onshore markets
Hong Kong stocks soared by the most in more than a decade after a rout that sent the city’s benchmark index to a decade low. Risk appetite on tech leaders returned as China said it would not be implicated by sanctions levied on Russia over its Ukraine invasion.
The Hang Seng Index gained 7.3 per cent to 19,760.52 at 2.06pm local time, the biggest jump since a 7.4 per cent gain in April 2009. The rebounded helped claw back a big chunk of the US$300 billion destruction on Tuesday when the benchmark index hit a 10-year low.
The Tech Index surged by a record 17 per cent as many of the tech bellwethers chalked up gains of 20 per cent or more. The China’s Shanghai Composite Index added 3.3 per cent.
China pledged to ensure market stability, the state-run Xinhua news agency reported on Wednesday, citing a State Council committee meeting chaired by vice-premier Liu He. No details were given, though the remarks came after the onshore equity market slumped 8 per cent over two days in the worst rout since August 2015.
JD.com led index gains, appreciating 24 per cent to HK$201.20. Alibaba Group Holding, the owner of this newspaper, climbed 19 per cent from a record-low to HK$84.45 while Tencent Holdings advanced 10 per cent to HK$356.60. Both Meituan and NetEase added at least 17 per cent.
“At a time of elevated market nervousness amid soaring geopolitical uncertainty, it is impossible to predict how market dynamics will evolve in the near term,” said Yan Wang, chief emerging markets and China strategist at Alpine Macro. “What’s more certain is that it is never wise to sell into the capitulation phase of a market rout.”
Markets in Hong Kong and mainland China this week suffered one of their worst beatings since the 2008 financial crisis after JPMorgan Chase called most Chinese internet stocks under its coverage as “uninvestable” because global funds are shunning macro and geopolitical risks.
China is facing a resurgence in Covid-19 infections unseen since the first outbreak in Wuhan two years ago, threatening economic recovery. Shenzhen has been locked down and some parts of Shanghai sealed off. Investors also dumped their China stock bets on concerns about sanctions for its purported support to Russia.
“China is not involved in the crisis and we do not wish to be affected by the sanctions,” Foreign Minister Wang Yi said late Monday in a call with his Spanish counterpart. “China has the right to defend its own interests,” adding that “we wish to see fair peace talks between Europe and Russia.”
The recovery in Chinese technology stocks came after more than a third of the market capitalisation has been erased since the start of the year. An overnight relief rally in US markets, including a 5 per cent bounce in the Nasdaq Golden Dragon China Index, helped calm nerves.
“The sell-off is largely over at this moment,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “Share prices are so low that even if [investors] wanted to sell now, it is not a good time, thus giving room for rebound.”
Shaanxi Sirui Advanced Materials Company, which produces products including copper alloy and electrical contact materials, jumped on 78 per cent on its first day of trading in Shanghai.
Shares rose in Asia-Pacific, before a Federal Reserve decision on policy rate later Wednesday. Japanese stocks led with a 1.9 per cent gain while South Korean and Australian equities appreciated at least 1.1 per cent.
Author: Cheryl Heng, SCMP