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Chinese equities were on track for their biggest gain in a day for almost three years on Monday, recording a dramatic rebound after Beijing took a concerted move last week to reassure investors and boost markets after a strong sell.
The CSI 300 index of companies listed on the Shanghai and Shenzhen Stock Exchanges rose 4.4% in mid-day, allowing it to achieve its largest single-day gain since November 2015.
Shares of Chinese Hong Kong-listed companies in Hong Kong also climbed, with the Hang Seng China Enterprises Index of Chinese listed companies up 3.3%, en route for its best day since October latest. The Hang Seng benchmark, up more than 2%, was supported by a 4% gain for the Chinese gaming company Tencent.
Investors have been selling Chinese equities over the last few weeks, dragging the CSI 300 into a free fall, recording its biggest monthly drop since January 2016, disconcerted by months of trade tensions between China and the United States, and concerns about emerging market currencies.
The MSCI Asia ex Japan index is in bearish territory and has fallen 23% since January.
"After a month of tension and tension for Asian equities as a whole, they have taken a break, but that does not mean volatility will disappear," said Kerry Craig, global markets strategist at JP Morgan Asset Management. .
"If China sneezes, the rest of the region gets a cold. The A-share market was significantly liquidated this year. We expect a rebound after volatility.
This rally took place after the leaders of China's central bank, the regulator of banks and insurance, and the securities watchdog said Friday to the media that the stock market slump did not reflect the economic health of the country and that the authorities would take steps to help the markets. .
This rare joint comment followed the release of quarterly GDP data, which showed 6.5% growth lower than expected in the third quarter. This allowed the CSI 300 to get closer to 3.1% on Friday.
The measures announced on Friday included a commitment by the central bank to ensure sufficient liquidity in the banking system. Over the weekend, state media also unveiled temporary changes to personal income tax legislation, including additional special deductions.
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Investors were frightened this year by the breakdown in trade between Beijing and Washington, the rise in US interest rates, strong sales in emerging market currencies and fuzzy valuations in some sectors such as technology.
China has been the world's worst performing stock market this year and has fallen 25% from the 2018 peak in 2018.
The fall in equities weighed on the Chinese currency, pushing the renminbi towards $ 7 against the US dollar – a threshold considered psychologically significant by analysts and the last level reached ten years ago during the global financial crisis. The exchange rate of the US dollar was Rmb 6.9321 per dollar on Monday.
The region's technology stocks had a difficult time, with Tencent shares falling by nearly 40% from the peak reached in January this year.
"In the face of growing concerns about the business impact, we have also seen fund managers reduce their positions in China," said William Yuen, fund manager at Invesco. "China's technology stocks are bulky and liquid and are seen as an indirect indicator of China, so it's one of those sectors that's easy to cut."
Other reports from Alice Woodhouse and Hudson Lockett
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