China equities climbed higher on top of Wednesday’s gains after Beijing pushed for stabilizing financial markets incentivizing buyers to return to the market after historic selloff in earlier sessions.
The Hong Kong based Hang Seng China Enterprises Index was up 6.32% as of Thailand time 10:44 hours. Property and technology stocks gained the most after Beijing vowed to ease regulatory crackdown and pledged support for companies in both of these sectors. The gain in the Chinese sub-index in HSI market the biggest advance since 2008.
The gains are also anticipated after U.S. Federal Reserves hiked rates shunning down market jitters of uncertainties in handling soaring inflation that has reached record highs breaching the Fed’s target rate.
However, investors are still questioning on the sustainability of the rebound, despite promise of the officials. Most investors are willing to see easing of the COVID-19 curbs in the tech and real estate sectors before being convinced of an end to the broad based market selloff.
“In the short term, it’s fund flow and liquidity that’s driving up the whole market, on the back of such a cheap valuation level,” said Kenny Wen, a strategist at Everbright Sun Hung Kai Co, as reported by Bloomberg.
“But whether the market can keep rallying is really up to the regulatory environment and corporate earnings recovery story.”
“Tech will keep recovering but it remains challenging for them to recover to the previous levels, given the shifted regulatory regime in general,” Wen said.
Meanwhile, broad market index HSI inched up by 5.93% while the sub-index Tech Index was up by 7.38% as of Thailand time 9:48 hours. However, the index is almost down by 60% from its peak in February 2021, underlying the expectation of year-long crackdown on the sector.
U.S. accounting watchdog on the other hand said Beijing needs to provide complete access to audits of Chinese companies that are listed in the U.S.. This could be viewed as American exchanges are willing to delist Chinese stocks if they fail to comply with accounting standards.
A gauge of Chinese property developers complied by Bloomberg climbed 10% on Thursday.
Corporate bonds of Chinese real estate companies climbed 2 cent on the dollar, a muted move given half of junk rated developers bonds are trading at less than 50 cents.