Chinese Equities Climbed as Lower Virus Cases Boosts Sentiment

Chinese stocks rallied fora second day as decline in virus cased boosted sentiment among traders in the nation’s battered equity market.

The benchmark CSI 300 Index jumped as much as 2.21%. Stocks also climbed in Hong Kong up by 1.63%.

Shanghai reported a 51% drop in new infections for Tuesday to 1,487 cases. More significantly, no cases were found outside quarantine. Cases also fell in Beijing.

“A drop in Covid cases in Shanghai and increased expectations of policy impetus to buoy growth in the second half are factors working together at this stage,” said Du Kejun, partner at Beijing Gelei Asset Management Center Limited Partnership.
“Longer-term funds could be buying the dip, while short-term money could also be getting more active to trade a technical bounce.”
The rebound is once again spurring hopes that the worst maybe over for Chinese equities after a months long selloff triggered by Covid-19 lockdowns, regulatory crackdowns and rising global interest rates.

Beijing’s policy measures and vows for market stability since mid-March have only lead to temporary gains.

China’s onshore market has solid foundation for stable operation, according to a CCTV report on Tuesday citing China Securities Regulatory Commission.

Also adding to the buoyant sentiment is President Joe Biden’s comment that he and his advisers are weighing whether to cut US tariffs on foreign imports to fight inflation.

“The latest remark from CSRC, coupled with Covid situation in Shanghai, which seems to be more in control, and report of potential tariff relaxation from the US, may have boosted today’s sentiment,” said Kevin Li, fund manager at GF Asset Management (Hong Kong) Ltd as reported by Bloomberg.

Meanwhile the onshore yuan also rose 0.1% against the dollar after the central bank set a stronger-than expected yuan fixing rate. The offshore yuan was steady.

According to Morgan Stanley strategists, China equities appear to be nearing the late stage of a bear market but the final leg will be bumpy.

“More people are ready to bottom fish” given that losses have been so excessive this year, said Huang Yuhang, fund manager at Lanqern Capital Mangement Co. as reported by Bloomberg.