Chinese stocks soar as Beijing ramps up efforts to calm the market

(Bloomberg) — Shares in China and Hong Kong rose Thursday after authorities stepped up efforts to calm fears of a crackdown on the private education sector and as the central bank pumped liquidity into the financial system.

The CSI 300 Index closed 1.9% higher, led by materials and industrial stocks. Hong Kong’s Hang Seng index rose a whopping 3.4%, while Meituan and Tencent Holdings Ltd. both increased more than 10%. Technology shares extensive gains after a report said China will continue to allow its companies to move to the US as long as they meet listing requirements, following Didi Global Inc.’s controversial debut.

In an effort to ease investor fears, the national securities regulator held a video conference with bank executives Wednesday night, conveying the message that education policies were not intended to harm companies in other sectors. Confidence was further bolstered after the central bank broke out of its usual pattern of daily operations to add cash. The liquidity sensitive ChiNext meter of equities rose 5.3%.

Wednesday’s meeting had given investors some reassurance, said Jun Rong Yeap, market strategist at IG Asia Pte. But whether this is just a temporary reprieve or a longer-term upward trend, the answer still lies in whether Beijing can calm investors’ nerves about the subsequent crackdown and the impact on domestic business growth.

The Hang Seng Tech Index rose a whopping 8%. Education companies, some of which are quick to revise their businesses to adapt to the new regulations, also traded higher after selling heavily earlier this week. New Oriental Education & Technology Group Inc. added a whopping 13%, while Koolearn Technology Holding Ltd. 21% won.

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“It’s a good relief after the trauma of the past few days,” said Gary Dugan, chief executive officer of the Global CIO Office, noting that authorities are “trying to draw a line” amid this week’s market turmoil. . “International investors are bloodied by the experience and will remain suspicious that foreign-listed Chinese companies are heavily controlled by policymakers.”

Wednesday’s hastily arranged meeting led by Chinese Securities Regulatory Commission vice-chairman Fang Xinghai was the latest sign of Beijing’s unease with a sell-off that sent the country’s major stock indices to the brink of a bear market. State media have published a series of articles suggesting the defeat has been exaggerated, with some analysts speculating that government funds have begun to intervene to support the market.

However, the meeting “will not completely allay investors’ concerns, as the regulatory policy was not from CSRC,” said Daniel So, a strategist at CMB International Securities Ltd. “The net injection of the PBOC is good news for the stock market, but we have yet to monitor whether this becomes a longer-term trend.”

Interbank borrowing costs fell after the People’s Bank of China pumped 30 billion yuan ($4.6 billion) of liquidity into the financial system with seven-day reverse repurchase agreements, resulting in a net injection of 20 billion yuan. That was the first short-term cash addition of more than 10 billion yuan since June 30.

Yields on China’s most actively traded 10-year government bond contract fell for the first time in three days, following Tuesday’s largest increase in a year.

The sharp falls in stock markets earlier this week were triggered by China’s shocking decision to ban parts of its thriving tutoring industry from making profits, raising foreign capital and going public. It was the government’s most extreme move yet to rein in companies it blames for increasing inequality, increasing financial risk and challenging the Communist Party’s grip on key segments of the economy. the economy.

An editorial on Thursday’s front page by the Economic Daily bolstered the message that recent policies on technology and education sectors were not aimed at limiting or suppressing the development of certain industries, while state-run Xinhua said the strengthening economy of China a guarantee and basis for capital. market development.

“Today’s recovery is encouraging, but regulatory risks are entrenched in the minds of investors,” said Margaret Yang, strategist at DailyFX. “Many investors were stuck with unrealized losses and may be trying to sell the recovery. This could weigh on short-term sentiment for HK tech companies.”

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