Please see below article received from EPIC Investment Partners this morning, which provides an update on Chinese and Hong Kong stock markets.
Chinese stocks bounced aggressively overnight in anticipation of a more forceful response to the ongoing rout, with regulators also planning to brief President Xi Jinping on market conditions. Although it remains uncertain if the upcoming meeting will result in new measures to bolster the market, investors are hopeful for a positive change after many false dawns.
Since reaching their peak in 2021, Chinese and Hong Kong stock markets have lost approximately USD7tn in value, USD1tn of that in the last 13 days until last night’s rally. The Hang Seng closed over 4% higher, with the CSI 300 up nearly 3.5% and the CSI 1000 gaining 7%.
Efforts by policymakers to stimulate the economy and stabilise the markets have so far not yet yielded any success in improving investor confidence. With the Lunar New Year holiday approaching, stabilising the stock market has now become a crucial goal for policymakers to prevent further damage to consumer confidence.
Following the news of President Xi’s meeting, there were a series of statements earlier in the day. One notable statement came from the massive USD11.4tn Central Huijin Investment, a company holding stakes for the Chinese government in major financial institutions, which pledged to increase its purchases of exchange-traded funds. Additionally, the securities regulatory authority emphasised their commitment to ensuring stable market operations in a subsequent remark.
Authorities have once again tightened trading restrictions, banning some hedge funds from placing sell orders, cracking down on short selling, and stopping investors from cutting stock positions in their leveraged market-neutral funds. On Monday, the securities regulator said it will guide brokerages to adjust their margin call levels and maintain “flexible” liquidation lines to limit forced selling.
Earlier efforts had already included curbs on short selling, coupled with the state’s share purchases across the nation’s largest banks. However, the measures so far have shown little success in restoring investor confidence, which has been hurt in recent years by an economic slowdown, the implosion in the property sector, as well as Xi’s tightening grip on private enterprise.
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