HONG KONG/SHANGHAI: Chinese stocks reversed recent losses, the yuan rebounded while bond futures slumped on Tuesday as investors bet signs of civil discontent could prompt an easing of strict COVID-19 curbs and cheered a relaxation of regulations on developer fundraising.
China’s blue-chip index CSI300 rose 3% to its best session in three weeks. The Shanghai Composite Index gained 2.3% to hit a two-month high. Hong Kong’s Hang Seng shot up by 5% and tech shares leapt nearly 8%.
Tuesday’s euphoria eclipsed the despair of the previous session when worries over rising COVID-19 infections and signs of unrest had rattled markets.
Police had begun investigating some of the protests’ participants on Tuesday, but health officials also outlined an effort to compress vaccination courses for the elderly and said complaints about policies were mainly to do with implementation.
“The government must be worried about widespread discontent. If tough crackdown is not the choice, reopening is the option,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management.
The yuan jumped about 0.6% to 7.1663 per dollar in the onshore session, testing its 50-day moving average. Ten-year government bond futures dropped nearly 40 ticks and were near four-month lows.
Ten-year cash yields are up 25 basis points this month, according to Refinitiv data, the largest monthly rise in 3-1/2 years as markets have gyrated to hints and rumours of a reopening, news of rising cases and fresh lockdowns.
“The most important development from the past few days is that there is a public debate on the zero-COVID policy in China,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
“The government did not react by shutting those voices down. Instead there are signals that the government is listening.”
China’s tourism and catering stocks jumped more than 5%.
The mood and market moves led gains around Asia, where the China-sensitive Australian dollar and New Zealand dollar also bounced back from Monday losses.
Further gains now hinge on follow-through from policymakers, market participants say.
Hong Kong, China stocks hit by protests
“This is a time for the top decision makers to come out and spell out why and how we should relax the COVID controls,” said Helen Qiao, chief greater china economist at Bank of America Global Research.
Moody
The moves extended a rally in China assets that had begun overnight in New York thanks to impressive results from e-commerce platform Pinduoduo, which beat Wall Street revenue estimates and rose almost 13%.
The Nasdaq Golden Dragon index rose 2.8% overnight and is up by a third in the past month, with Pinduoduo’s result highlighting a divergent outlook with U.S. tech firms which had a mixed earnings season with several big disappointments.
Online giants such as Alibaba, Meituian and JD.com made strong gains of 9% or more.
Property and banking shares also surged, after China’s securities regulator lifted a six-year-old ban on China- and Hong Kong-listed Chinese developers selling additional stock.
The announcement followed government measures to direct financing to China’s struggling real estate sector.
An index tracking China-listed shares jumped almost 8% to the highest level in six months, while Hong Kong-listed Chinese developers surged 8% and hit a two-month high.
A slew of China-listed developers, including Vanke , Jinke Property and Financial Street jumped to their daily limit of 10%. In Hong Kong, Country Garden’s property management arm rose 14% and Longfor Group surged 11%.
The strong market reaction shows the latest measure “is more heartening than previous policies”, said Yuejin Yan, head of research at the Shanghai E-house Real Estate Research Institute.
Banking shares also surged, as investors bet a healthier property market would reduce the risk of bad loans.
Financial stocks rose 4.4% in Hong Kong; they jumped nearly 6% in China, their best day in more than two years.
US-listed shares of Chinese firms rallied in premarket trading, tracking their domestic peers.
Gaming firm Bilibili Inc’s U.S. shares surged 9%, also helped by upbeat third-quarter results, while e-commerce firm Alibaba Group Holding Ltd and China’s search engine giant Baidu Inc added 6% each.
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