Wrapup 3: China stocks notch trillion-dollar gain on hopes of reopening, better U.S. ties

Country Garden Services Holdings

04/11/2022 08:44

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      Hang Seng surges to best week since 2011
    

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      Tech, property stocks lead gains
    

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      Yuan, commodities, China-sensitive luxury stocks rise
    

  
 (Adds fund manager quote, chart)
    By Rae Wee and Ankur Banerjee
       SINGAPORE, Nov 4 (Reuters) - Chinese markets soared and
the yuan rose on Friday, with about a trillion dollars added to
the value of Chinese stocks in week, as rumours and news reports
fed hopes for twin relief in U.S.-China tension and China's
tough COVID rules.
    The Hang Seng  .HSI  surged 5.3% and notched its biggest
weekly gain in 11 years. The Shanghai Composite  .SSEC  rose
2.4% for a 5.3% weekly gain, the largest in more than two years
and China-sensitive assets around the world rose sharply.
    Bloomberg News reported initial U.S. inspections of audit
papers at U.S.-listed Chinese companies - a long-running point
of regulatory tension and risk - finished ahead of time, raising
hopes that the U.S. officials were satisfied.
        Unsubstantiated social media posts flagging an aim to
relax COVID rules in March have also driven optimism all week
and seemed to get new momentum on Friday.
    "The optimism right now is basically a removal of certain
types of uncertainties that have been lingering ... but the
outlook is really mixed," said Peiqian Liu, China economist at
NatWest Markets in Singapore.
    Gains were broad, defying a downbeat mood in global markets
weighed by the prospect of U.S. interest rates rising further
than previously expected. Property and tech shares led the way.
    Shares in online giants Alibaba  9988.HK  and JD.com
 9618.HK  each rose more than 10% and the Hang Seng Tech index
 .HSTECH  rose 7.5%. Property manager Country Garden Services
 6098.HK  rose 15% and an index of mainland developers  .HSMPI 
rose 9%.
    Hedge fund manager Lei Ming said the re-opening rumour is
just the trigger for a rebound in an oversold market.
    "Such an expectation has been there for some time," Lei
said.
    "The main reason for the market jump is that selling
pressure had been exhausted after the market fell so much."
    Gains in value, across Hong Kong, Shenzhen and Shanghai over
the week are approximately $1 trillion. However the Hang Seng
remains down 30% this year against a 24% fall in world stocks
 .MIWD00000PUS . The Shanghai Composite is down 15% this year.
    The rally extended to commodities markets with iron ore
futures surging on Friday, and China-sensitive stocks listed in
London and Europe.
    Miners such Rio Tinto  RIO.L  and Anglo American  AAL.L 
rose sharply along with luxury retails like LVMH  LVMH.PA  and
Swiss jeweller Richemont  CFR.S .
    BUY THE RUMOUR
    Changes to COVID policies have not been officially flagged.
A foreign ministry spokesman said on Tuesday he was not aware of
the situation, when asked about rumours on social media that
China was planning a reopening from strict COVID curbs in March.
    Bloomberg News also reported on Friday, citing unnamed
people familiar with the matter, that China was working towards
relaxing rules that penalise airlines for carrying
COVID-positive passengers.
   A foreign ministry spokesman later said he was not aware of
the report and that China's COVID policies were consistent and
clear.
        An early conclusion to audit checks has also not been
confirmed by either Chinese or U.S. officials. Yet markets have
desperate reasons to rally after the Hang Seng hit a 13-year low
last month in the wake of China's Communist Party Congress.
    "I do not see anything new that has changed the Hong Kong
and China investment environment," said Frank Benzimra, head of
Asia equity strategy at Societe Generale in Hong Kong.
    "The only explanation I have is that the sell-off has been
excessive post-Congress, valuation on some offshore names has
been very distressed, and there is some bottom-fishing."
    The currency joined in the rally, jumping more than 0.5% to
touch a one-week high of 7.2340 per dollar. CNY/ 
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China, HK stocks market cap    https://tmsnrt.rs/3hffBNi
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 (Additional reporting by Summer Zhen in Hong Kong. Writing by
Tom Westbrook. Editing by Sam Holmes)
 ((tom.westbrook@tr.com; +65 6973 8284;))