Hong Kong stocks jump, China’s CSI 1000 logs historic rally amid market intervention as regulator pledges to stem rout

The China Securities Regulatory Commission tightened securities lending, warned against manipulation and ‘vicious short selling’
Central Huijin Investment, a unit of China’s sovereign wealth fund, to increase purchases in exchange-traded funds in bid to stabilise market

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:48am, 6 Feb 2024

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Stocks in Hong Kong rallied by the most in six months while equities in mainland China notched a historic gain amid signs of market intervention as the nation’s sovereign wealth fund made its involvement public. In Beijing, the securities regulator imposed fresh curbs on short selling.

The Hang Seng Index advanced 4 per cent to 16,136.87 on Tuesday to log its biggest gain since July 25. The Tech Index rallied 6.8 per cent. The Hang Seng China Enterprises Index, which tracks 50 major mainland companies, advanced 4.9 per cent for its biggest gain since March last year.

The Shanghai Composite Index surged 3.2 per cent, while the Shenzhen Composite Index logged a 5.1 per cent gain for its best day in five years. The CSI 1000 index of smaller-capitalised companies soared by a record 8.1 per cent, before paring it to 7 per cent at the close of trading.

“Policymakers are worried about such perennial declines in stocks and obviously want stocks to stabilise before the coming Lunar New Year,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “These measures will work for now to ease selling pressure.”

In Hong Kong, Alibaba Group surged 7.6 per cent to HK$76, Meituan gained 6.5 per cent to HK$69.25, and Tencent added 4 per cent to HK$290.80. China’s biggest chip maker SMIC rose 8.6 per cent to HK$15.34 and developer Longfor Group rallied 10 per cent to HK$9.18. EV maker BYD advanced 5.4 per cent to HK$180.90, and peer Geely Auto soared 7.5 per cent to HK$8.19.

China intervenes in market as regulator steps up scrutiny of stock rout

Central Huijin Investment, a unit of China’s US$1.24 trillion sovereign wealth fund, said on Tuesday it had increased investments in index-based exchange-traded funds (ETFs) recently and will buy more “to maintain the stability of the capital market”. It did not disclose the amount, in what was its second round of purchase of ETFs that track yuan-based shares since October.

The intervention followed verbal support over the past month from leaders including Premier Li Qiang. China’s stock markets are among the worst performers globally this year, with gauges falling more than 7 per cent before Tuesday’s surge. Chronic disappointment has set in as Beijing dithered on measures to rejuvenate the economy since its post-Covid growth lost momentum, while consumer and producer prices fell as demand waned.

China stocks rout exposes risk from US$30 billion of ‘snowball’ derivatives

The China Securities Regulatory Commission (CSRC) said in a statement that it would continue to guide more mutual and private funds, brokerages and social security funds into the market, and encourage more buy-backs as a way to attract fresh capital and maintain market stability.

The CSRC reiterated on Tuesday that it has zero tolerance for market misconduct, including “vicious short selling.” The watchdog also warned against market manipulation, and installed fresh curbs on securities lending and short selling, and curb the use of derivatives that perpetuate the market slump.

Elsewhere, major Asian markets fell. Japan’s Nikkei 225 slipped 0.5 per cent, while South Korea’s Kospi Index and Australia’s S&P/ASX 200 both weakened by 0.6 per cent.