(Bloomberg) — Chinese stocks rose as domestic traders returned from the Lunar New Year holiday, with strong travel and tourism data seen as providing much-needed relief to one of the world’s worst-performing major markets. It looks like preparations are in place for a solid move.
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Mainland trading will be closed from February 9 to 16, so investors are likely to take cues from gains in offshore-listed Chinese stocks. Hong Kong’s stock indexes have risen nearly 5% since trading resumed on Wednesday, and the Nasdaq Gold Dragon China Index has gained 4.3% for the week, highlighting the potential for a rebound in onshore stocks.
Read more: Builders lead Hong Kong stock rally with further financial support
Spending patterns on one of China’s most important holidays suggest that consumption is picking up even as the broader economy struggles with deflation and a real estate crisis. Market watchers are hoping the series of positive data will boost stocks, at least in the short term, and help authorities work to restore investor confidence. However, major questions remain about the sustainability of the recovery in the face of a severe economic crisis.
Linda Lam, head of North Asia equity advisory at Union Bancare Privy, said: “From holiday hotel sales to visitor numbers to Macau, early readings from Lunar New Year data show that service-related industries This shows that there are some bright spots.” “A-shares should start even more bullish as the stock price recovery continues on the back of state aid,” he said, referring to mainland-traded Chinese stocks.
A cluster of Chinese stocks in Hong Kong soared on holiday data showing rail travel rose 61% year-on-year during the height of the coronavirus outbreak in the city. Online hotel booking and delivery giant Meituan also posted strong profits.
Macau reported more than 1 million visitors in the first six days of the holiday, the highest since 2017, when daily data for the peak season was available, and tourists from the mainland It accounts for 77% of the total.
Read more: China’s surge in holiday travel hints at consumer spending recovery
China Tourism Group Duty Free Corp. rose more than 15% in three trading sessions after the Hong Kong holiday, while travel platform Trip.com Group rose 7%. Meituan and e-commerce giant JD.com Inc. each rose more than 10%.
Options data suggests traders are turning more bullish. The Hang Seng China Enterprise Index’s 25 delta skew, which measures the difference between investors’ demand for puts and calls, currently favors calls on contracts expiring in March.
Authorities sought to stem the stock market slide ahead of the holidays, increasing the amount of state-funded purchases, a series of regulatory adjustments to ease selling pressure, and an abrupt change in the head of the securities regulator. The move helped the benchmark CSI300 index rebound from a five-year low, rising 5.8% in the week before the holidays.
The continued rise is critical for the world’s second-largest market, which has fallen out of favor with investors after years of losses. Asset managers around the world are exiting Chinese stocks as geopolitical tensions and the Chinese government’s tight grip on the private sector bring the country’s tech giants to a standstill.
In addition to lower reserve requirements, traders are hoping for further policy support across monetary and fiscal sectors. It will be interesting to see if there are any signs of stimulus ahead of the country’s main annual meeting in March, when leaders will announce economic growth and development goals.
The People’s Bank of China on Sunday kept its key interest rate unchanged to prevent large swings in the yuan while assessing the impact of recent support measures.
The People’s Bank of China kept its one-year policy lending rate unchanged at 2.5%, as expected by most economists surveyed by Bloomberg.
Read more: China plans to postpone interest rate cuts until yuan data stabilizes
“Funds with light positioning heading into the holiday season are now more advantageously positioned due to improved liquidity following the RRR cut, a new head of the China Securities Regulatory Commission, and strong consumption due to the Lunar New Moon. , they may be more aggressive in adding A shares during the year-end holiday,” said Shen Meng, director of Chanson & Company in Beijing.
The CSI 300 gauge has lost more than 40% of its value since its peak in 2021, hit by the country’s strict COVID-19 measures, regulatory crackdowns, uneven economic recovery and geopolitical tensions. Ta.
Beyond the possibility of a short-term rebound, deep doubts persist about the market’s long-term outlook. A new Bank of America Corporation survey of global wealth managers reveals that shorting Chinese stocks has become the second-busiest trade in recent months. Became. A third of respondents said they would increase their allocation if more aggressive fiscal policy was expected to support the real estate sector.
“In the short term, national team buying will remain a key factor supporting the Chinese market,” said Daisy Li, a fund manager at EFG Asset Management. “The next three to six months will depend on what targets China sets for economic growth and fiscal deficit this year.”
Read more: Xi can’t use 2015 strategy to calm Chinese market, investors say
–With assistance from Akshay Chinchalkar, Tom Hancock, James Mayger, and Adam Majendie.
(Added determination of central bank interest rate to paragraphs 12 and 13.)
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