Chinese equities have experienced one of the worst 12 months in their history, but in late trading yesterday afternoon the government’s top financial body pledged to make various policy changes to “ensure stability in capital markets, support overseas stock listings, resolve risks around property developers and complete the crackdown on Big Tech as soon as possible.” The People’s Bank of China also followed suit and ensured that the central bank will assist in implementing these policies.
The stock market responded to these statements extremely positively as this is the first time the government has publicly addressed the concerns of investors in the market.
This intervention is seen as much needed as investor sentiment in the Chinese markets has been the weakest since the GFC. Just in the last month, the Hang Seng index has crashed over 24% and 40% in the last 12 months, which is the worst index performance in the world.
However, some people do not have as much faith in the government’s intentions; Sean Debow the CEO of Eurizon Capital Asia said: “I do not believe this is a turning point -- we are in a very turbulent period… “In order to catch a falling knife, you have to have very very strong conviction, and we don’t have that yet.”
Regardless, at the end of trading after 4 p.m. local time on Wednesday, the Hang Seng China Enterprises Index was up 12.5% and boasted its best session since October 2008. Alibaba Group Holding Ltd. surged 27%, while JD.com Inc. jumped 36%. Property stocks also rallied the most in more than a decade.