Chinese tech stocks soar by record in Hong Kong as Beijing pledges support for troubled markets

Hang Seng Index logged best day since October 2008 while the Tech Index rallied by a record since inception in July 2020
A State Council committee pledged to ensure market stability, Xinhua reported, after a rout in offshore Chinese stocks infected onshore markets

Hong Kong stock market

Cheryl Heng

Published: 10:34am, 16 Mar 2022

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Hong Kong stocks soared by the most since October 2008 as risk appetite returned after China vowed to ensure market stability. The support drove a record rally in tech stocks from Alibaba to JD.com charted unprecedented 20 per cent-plus gains.

The Hang Seng Index jumped 9.1 per cent to 20,087.50 at the close of Wednesday trading, the biggest advance since a 12.8 per cent surge seen during the post-Lehman crisis more than 13 years ago. The rebound helped claw back much of the US$300 billion destruction on Tuesday when the benchmark slid to a 10-year low.

The Tech Index surged 22 per cent, the most since its July 2020 inception. The China’s Shanghai Composite Index added 3.5 per cent, after losing 8 per cent over two days in the worst sell-off since August 2015.

China pledged to ensure market stability, the state-run Xinhua news agency reported on Wednesday, citing a State Council committee meeting chaired by vice-premier Liu He. It also added that talks with US agencies are progressing on accounting issues involving Chinese companies listed in New York.

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JD.com led index gains, appreciating 36 per cent to HK$219.60. Alibaba Group Holding, the owner of this newspaper, climbed 27 per cent from a record-low to HK$90.70 while Tencent Holdings advanced 23 per cent to HK$367. Both Meituan and NetEase added at least 23 per cent.

“These announcements don’t mean much individually, but collectively, they suggest policymakers won’t sit idle, and that asset prices will be supported,” said Stephen Innes, managing partner at SPI Asset Management in Bangkok. “Supporting risk sentiment is something that the state apparatus controls, and that’s precisely what they are doing.”

Markets in Hong Kong and mainland China this week suffered one of their worst beatings since the 2008 crisis after JPMorgan Chase called most Chinese internet stocks under its coverage as “uninvestable” because global funds are shunning macro and geopolitical risks.

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China is facing a resurgence in Covid-19 infections unseen since the first outbreak in Wuhan two years ago, threatening economic recovery. Shenzhen has been locked down and some parts of Shanghai sealed off. Investors also dumped their China stock bets on concerns about sanctions for its purported support to Russia.

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“China is not involved in the crisis and we do not wish to be affected by the sanctions,” Foreign Minister Wang Yi said late Monday in a call with his Spanish counterpart. “China has the right to defend its own interests,” adding that “we wish to see fair peace talks between Europe and Russia.”

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The recovery in Chinese technology stocks came after more than a third of the market capitalisation has been erased since the start of the year. An overnight relief rally in US markets, including a 5 per cent bounce in the Nasdaq Golden Dragon China Index, helped calm nerves.

“At a time of elevated market nervousness amid soaring geopolitical uncertainty, it is impossible to predict how market dynamics will evolve in the near term,” said Yan Wang, chief emerging markets and China strategist at Alpine Macro. “What’s more certain is that it is never wise to sell into the capitulation phase of a market rout.”

Shaanxi Sirui Advanced Materials Company, which produces products including copper alloy and electrical contact materials, jumped on 90 per cent on its first day of trading in Shanghai.

Shares rose in Asia-Pacific, before a Federal Reserve decision on policy rate later Wednesday. Japanese stocks led with a 1.6 per cent gain while South Korean and Australian equities appreciated at least 1.1 per cent.