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(Bloomberg) – Shares in China and Hong Kong surged on Thursday, after authorities stepped up efforts to allay fears of a crackdown on the private education sector and the central bank pumped liquidity into the financial system.
The CSI 300 index closed 1.9% higher, led by materials and industrials values. Hong Kong’s Hang Seng Index rose 3.3%, Meituan and Tencent Holdings Ltd. both having climbed at least 9%. Tech stocks extended their gains after a report said China would continue to allow its companies to go public in the United States as long as they meet listing requirements, following the controversial debut of Didi Global Inc.
In an effort to alleviate investor anxiety, the national securities regulator hosted a video conference with bank executives on Wednesday evening, sending the message that education policies were not meant to harm investors. companies from other sectors. Confidence grew further after the central bank broke with its usual pattern of daily operations to add liquidity. The liquidity-sensitive ChiNext stock gauge rose 5.3%.
Wednesday’s meeting reassured investors, said Jun Rong Yeap, market strategist at IG Asia Pte. “But whether it’s a temporary reprieve or a longer-term uptrend, the answer always lies in whether Beijing can calm investors’ nerves about subsequent regulatory action and the impact on the growth of domestic enterprises. “
The Hang Seng technology index jumped 8%. Companies in the education sector, some of which are set to quickly reorganize their businesses to adapt to new regulations, were also on the rise after being sold heavily earlier in the week. New Oriental Education & Technology Group Inc. gained 13% while Koolearn Technology Holding Ltd. won 20%.
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“It’s a good rally of relief after the trauma of the past few days,” said Gary Dugan, managing director of the Global CIO Office, noting that authorities “were trying to draw a line” under this week’s market turmoil. “International investors are bloodied by the experience and will remain wary that Chinese companies listed overseas are subject to scrutiny from policymakers.”
The hastily organized meeting on Wednesday, chaired by China Securities Regulatory Commission Vice Chairman Fang Xinghai, was the latest sign of Beijing’s unease over a massive sell-off that sent the country’s major stock indexes to the edge of a bear market. State-run media ran a series of articles suggesting the rout is overdone, while some analysts have speculated that government-linked funds have started stepping in to support the market.
However, the meeting “will not completely allay investor concerns as the regulatory policy was not from the CSRC,” said Daniel So, strategist at CMB Internatioal Securities Ltd. “The net injection of the PBOC is good news for the stock market, but we still need to watch if this becomes a longer-term trend.”
Interbank borrowing costs fell after the People’s Bank of China injected 30 billion yuan ($ 4.6 billion) of liquidity into the financial system with seven-day repo agreements, resulting in a net injection of 20 billion yuan. It was the first short-term liquidity addition of over 10 billion yuan since June 30.
The yield on China’s most actively traded 10-year government bond contract fell for the first time in three days, after rising the most in a year on Tuesday.
The steep stock market declines earlier this week were sparked by China’s shock decision to ban entire swathes of its burgeoning tutoring industry from making profits, raising foreign capital and going public. It was the most extreme government move to date to curb companies it accuses of exacerbating inequalities, increasing financial risks and challenging the Communist Party’s grip on key segments of the world. ‘economy.
A front-page editorial published Thursday by the Economic Daily reinforced the message that recent policies on the tech and tutoring sectors were not aimed at restricting or suppressing the development of certain industries, while the agency Xinhua State said that the strengthening of the Chinese economy provides a guarantee and a basis for the development capital of the market.
“Today’s rebound is encouraging, but regulatory risks are ingrained in the minds of investors,” said Margaret Yang, strategist at DailyFX. “Many investors have been trapped by unrealized losses and may try to sell the rebound. This could weigh on the short-term sentiment of Hong Kong tech companies. “
(Update market movements throughout)
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