SHANGHAI: China and Hong Kong stocks rose on Monday, tracking gains in global peers after US authorities stepped in to limit the fallout from the collapse of Silicon Valley Bank (SVB).
The rally also came as investors cheered more evidence of China’s recovery, and after Beijing surprised by keeping the head of the central bank and finance minister in their posts at the annual session of parliament on Sunday.
The blue-chip CSI 300 Index climbed 0.9% by the end of the morning session, and Hong Kong’s Hang Seng benchmark surged 2.3%.
“The move cut off the spread of pessimism among depositors in the short term, gave the market confidence, and prevented bank runs,” said Pang Xichun, research director at Nanjing RiskHunt Investment Management Co.
“Uncertain fundamentals put pressure on the US dollar and led to passive appreciation in the yuan, which will benefit China assets in the near term.”
“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” wrote analysts at Goldman Sachs.
In a joint statement, the US Treasury and Federal Reserve announced a range of measures to stabilise the banking system and said depositors at SVB would have access to their deposits on Monday, sending US stock futures up.
Tech giants listed in Hong Kong jumped 4.4%, and China’s computer shares advanced 3.5%. New Chinese Premier Li Qiang sought to reassure the country’s private sector, and President Xi Jinping said China must achieve greater self-reliance and strength in science and technology.
Shanghai Pudong Development Bank, which has a joint venture with SVB, slipped 1.1% even after the venture said it has a sound corporate structure and an independently operated balance sheet.
China’s banking stocks, meanwhile, edged up 0.3%. Chinese-based firms which say they have minimal exposure to SVB mostly edged up, with Broncus Holding Corporation advancing 2.8% while drug developer Beigene Ltd slipped 0.5%.
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Further supporting sentiment, China reported unexpectedly strong credit growth for February, with money supply expanding at the fastest pace in nearly 7 years, as Beijing looks to support a nascent economic recovery amid rising global risks.
“Nonetheless, much still depends on the strength of the Chinese economic recovery.
Investors will closely monitor the activity data scheduled for release this Wednesday to gauge the state of the Chinese economy,“ said Redmond Wong, Greater China market strategist at Saxo Markets.
Beijing’s decision to keep the head of the central bank and finance minister in their posts was seen as prioritising continuity as economic challenges loom at home and abroad.
The move reflected “policymakers’ goal of ensuring smooth transition amid institutional reform of the financial regulatory bodies,” Goldman Sachs analysts wrote.
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