China is hoarding trillions of dollars in profits in hopes of reopening, better US relations

  • The Hong Kong rose to its best week since 2011
  • Technology, property stocks gain
  • Yuan, commodities, China sensitive luxury stocks rise

SINGAPORE, Nov 4 (Reuters) – Chinese markets rallied and the yuan rose on Friday, adding about a trillion dollars to the value of Chinese stocks for the week, as U.S.-China tensions and rumors and news reports of China’s dual bailout fueled optimism. Strict covid rules.

The Hong Cheng (.HSI) It rose 5.3% and posted its biggest weekly gain in 11 years. Shanghai Mix (.SSEC) It rose 2.4% for a weekly gain of 5.3%, the biggest in more than two years, and China-sensitive assets around the world rose sharply.

Bloomberg News reported that initial US inspections of audit papers at US-listed Chinese companies – a long-running regulatory tension and risk – ended ahead of schedule, raising hopes that US officials were satisfied.

Unsubstantiated social media posts flagging an intention to relax Covid rules in March had fueled optimism throughout the week and appeared to gain fresh momentum on Friday.

A former senior Chinese disease control official told a closed-door briefing that significant changes to the country’s zero-covid policy would take place in the next five to six months, according to a recording of the session heard by Reuters.

“Any sign that some rules may be relaxed is Greece’s immediate dose of China’s economy’s jarring cox,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdowne.

The focus was on a press conference by Chinese health officials on November 5.

Gains were broad, masking a bearish sentiment in global markets due to the prospect of US interest rates rising further than previously expected. Property and technology stocks led the way.

Shares in online giant Alibaba (9988.HK) and (9618.HK) Each rose more than 10% and the Hang Seng Tech index (.HSTECH) 7.5% up. Property manager Country Garden Services rose 15% and the mainland developers index (.HSMPI) 9% up.

Hedge fund manager Lee Ming said the reopening rumor was a trigger for a rebound in an oversold market.

“The main reason for the market decline is that the selling pressure is exhausted after the market has fallen too much.”

The value received across Hong Kong, Shenzhen and Shanghai during the week was approximately $1 trillion. However, the Hang Seng is down 30% this year against a 24% drop in global stocks (.MIWD00000PUS). The Shanghai Composite is down 15% this year.

A view of a giant display of stock indices following the outbreak of the coronavirus disease (COVID-19) in Shanghai, China, on October 24, 2022. REUTERS/Aly Song

Iron ore futures rose on Friday and the rally extended to commodity markets with China-sensitive stocks listed in London and Europe.

Miners like Rio Tinto (RIO.L) and Anglo American (AAL.L) Along with luxury retailers such as LVMH rose sharply (LVMH.PA) and Swiss Jewelers Richmond (CFR.S).

US-listed China stocks rose in early trade, along with the Nasdaq Golden Dragon China Index (.HXC) It is on track for its best week in eight months following its worst monthly performance in October.

Strategists at TD Securities continue to expect a gradual easing of zero-COVID restrictions, warning that markets could face some disappointment if investors expect something more rapid.

China stock market cap

Buy the rumor

Changes in Covid policies have not been officially flagged. A foreign ministry spokesman on Tuesday said he was unaware of the situation when asked about rumors on social media that China plans to reopen from stricter COVID restrictions in March.

China is working to loosen rules that penalize airlines for carrying Covid-positive passengers, Bloomberg News reported on Friday, citing unnamed people familiar with the matter.

A foreign ministry spokesperson later said he was not aware of the report and that China’s Covid policies were consistent and clear.

The preliminary results of the audit checks have not been confirmed by Chinese or US authorities. There are pessimistic reasons for markets to rally after the Hong Kong fell to a 13-year low last month in the wake of China’s Communist Party congress.

“I don’t see anything new that has changed the Hong Kong and China investment climate,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong.

“The only explanation I have is that sales were high after Congress, valuations on some marine names are very worrying, and there is some bottom fishing.”

The currency joined the rally, hitting a one-week high of 7.2340 per dollar.

Reporting by Medha Singh in Bangalore, Additional reporting by Summer Jen in Hong Kong. Written by Tom Westbrook. Editing by Sam Holmes and Soumyadeep Chakraborty

Our Standards: Thomson Reuters Trust Principles.

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