Everything suddenly went well for the Chinese stock market

(Bloomberg) — After being the world’s worst performer for much of this year, a key Chinese stock index posted its biggest gain yet in November.

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From controlling Covid to the property crisis and even the US-China relationship, the tide seems to be reversing all the major issues that have been plaguing the stock market in the world’s second-largest economy for almost two years. Fear of missing out on what is shaping up to be an epic bounce has sparked a buying frenzy.

The latest positive for investors was the face-to-face meeting between Joe Biden and Xi Jinping, which raised hopes for warmer ties between the two superpowers. That has fueled bets that better cooperation and collaboration between the two countries will reduce the risk of hundreds of Chinese companies such as Alibaba Group Holding Ltd being outlawed. from the US due to audit issues.

A gauge of Chinese technology firms listed in Hong Kong jumped 7.3% on Tuesday. The broader Hang Seng China Enterprises Index rose nearly 5 percent after entering bull market territory the previous day. The Hang Seng index, Hong Kong’s benchmark, also hit the milestone on Tuesday, rising more than 4%.

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“China seems to be quickly addressing all the major issues of concern to investors, such as Covid Zero, the real estate slump and relations with the US,” said Wei-Sern Ling, managing director of Union Bancaire Privee. “Taken together, they also mitigate broader concerns that China may become more ideological, less pragmatic and increasingly isolated after the 20th Communist Party Congress.”

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The rally in November comes after four straight months of losses for key Chinese stock indicators leading up to President Xi Jinping’s unprecedented power reversal at the party congress last month.

The recovery began with frenzied speculation about a potential reopening of China, which gained some credence as authorities eased some Covid control measures last week. A series of moves to ease the cash crunch in the real estate sector added fuel to the rally as it gave traders confidence that Beijing is finally taking concrete steps to address the two biggest pain points for the economy – Covid Zero and the property crisis .

Technology and property stocks were the best performers in Hong Kong on Tuesday. Bloomberg Intelligence’s gauge of China’s real estate developers rose more than 3 percent, bringing the month’s gain to 61 percent.

Alibaba jumped more than 13% intraday on expectations that Thursday’s earnings would show the e-commerce firm returned to sales growth in the September quarter after its first decline in the previous period.

“While the meeting contained no dramatic breakthroughs, there was some progress worth noting that should be positive for Chinese stocks,” said Dylan Jagori, an analyst at Global X in New York, referring to the Xi-Biden meeting. “Channels of communication between US-China regulators are critical to reducing China’s ADR delisting risk. Greater engagement should help mitigate US political risk to Chinese equities.”

On the mainland, China’s benchmark CSI 300 rose 1.9%. After piling up a net 16.6 billion yuan ($2.4 billion) in onshore China stocks through trade ties with Hong Kong on Monday – the most since December 2021 – foreign investors were net buyers of another 8.2 billion yuan in Tuesday’s session.

Stocks rose even as data showed economic activity in China weakened in October, with industrial production missing expectations and retail sales contracting for the first time since May. In a sign of continued policy support, China tried to maintain sufficient cash levels in its financial system with liquidity instruments of varying maturities, helping to stem the worst sell-off in government bonds in six years.

“Initial reaction to China’s macro data looks positive, although it came in below expectations, which could raise the likelihood of more easing in the near term,” said Marvin Chen, an analyst at Bloomberg Intelligence.

–With assistance from John Cheng and Yiqing Shen.

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