China Stocks Pare Early Losses on Speculation of Policy Easing Financials, property shares among those leading rebound Traders assess Beijing’s support vows, risks from Russia ties Bloomberg News 2022年3月18日 GMT+8 上午9:33 Updated on2022年3月18日 GMT+8 下午4:52

Chinese stocks staged a late rebound in Friday’s session amid speculation that the central bank may soon ease monetary policy further following Beijing’s pledge to stabilize financial markets.

The Hang Seng China Enterprises Index, a gauge of Chinese firms listed in Hong Kong, ended down just 0.6% versus an earlier loss of as much as 3.6%. Financial and property stocks were among those that led the recovery. China’s benchmark CSI 300 Index reversed early declines to end 0.7% higher.

Expectations that the People’s Bank of China would take more steps in the near term to spur the economy led to the recovery in the afternoon session, according to traders. One tool could include cutting banks’ reserve requirements, they said. The Hang Seng gauge of Chinese stocks surged 21% in the previous two sessions, the most since 1998, as authorities made a concerted effort to shore up confidence following a historic rout.

“Just judging from the share moves, it looks like there are people trading on the possibility of a rate cut,” said Shi Junbo, a fund manager at Hangzhou Xiyan Asset Management Co. “It’s all guesses right now, but unless there were some kind of speculation, there wouldn’t be such moves.”

Chinese stocks on the mainland and in Hong Kong recovered late Friday

A growing number of economists also anticipate lenders will lower their quotes for the loan prime rate, the de-facto benchmark lending level, set to be announced by the PBOC on Monday.

Foreign investors were net buyers of Chinese shares for a second day, buying a net 8.5 billion yuan ($1.3 billion) of mainland stocks via trading links with Hong Kong.

READ: China Likely to Follow Up Easing Pledge With Concrete Steps

Friday’s trading caps another wild week for Chinese equities that saw investors dump shares in the first two days, not least because of the risk of new U.S. sanctions on the Asian nation due to its close ties with Russia. While Beijing’s vows to support markets spurred a stunning turnaround in the last two sessions, geopolitical concerns remain a key factor for investors.

‘Telling Moment’

Traders are keen to see what comes from the planned meeting between Chinese President Xi Jinping and U.S. President Joe Biden later in the day.

“These are difficult times. Traders and investors should be immediately aware of the risk this key historic phone call poses,” Clifford Bennett, chief economist at ACY Securities, wrote in a note, adding that a decision by the U.S. to impose new sanctions on China could wipe out recent stock gains. “It is a telling moment.”

China’s muted response to Russia’s invasion of Ukraine has hardened views within the U.S. administration that Xi may be moving closer to supporting Moscow as the conflict continues, according to several people familiar with the matter. Beijing denies it has tacitly backed the invasion and has rejected U.S. reports that Russia asked China for financial and military assistance shortly after touching off the war, labeling them disinformation.

Some market watchers are more optimistic.

“I am hopeful that the meeting between Xi and Biden will send out positive signals of soothing Sino-U.S. relations that will help stabilize market sentiment”, said Dickie Wong, executive director of research at Kingston Securities.

READ: Biden Team Hardens View of China Tilting Toward Putin on Ukraine

Turnover on an ETF tracking the Hang Seng Tech Index surged Friday

A Bloomberg gauge of Chinese developers’ shares posted a third day of gains, including a record 16% surge on Thursday. Ping An Insurance Group Co. was the top performer on the Hang Seng Index, which ended down 0.4% after losing as much as 2.7% in the morning session.

READ: Ping An Reverses Losses as Co-CEO Says Share Price Undervalued

While the Hang Seng Tech Index fell 1.9% on Friday, the gauge’s 5.6% gain for the week was the biggest since October. Turnover on an ETF in China tracking the tech measure surged to 8 billion yuan on Friday, more than triple its daily average this year.

Investors are also turning more hopeful that China will make adjustments to its Covid restrictions. Xi has pledged to reduce the economic impact of his Covid-fighting measures, signaling a shift in a longstanding strategy that has minimized fatalities but weighed heavily on the world’s second-largest economy.

READ: Xi Signals Tweaks to Covid Strategy as Economy Under Strain

Options traders were betting on more gains to come for Hong Kong stocks, with the Hang Seng Index’s put-to-call ratio -- which measures the demand for bearish options versus bullish ones -- dropping to around where it was near the market’s 2008-09 bottom.

“While markets wait for policy actions, there could be more ups and downs in stock prices. But at least now we have confirmed a ‘policy bottom’,” said Li Yan, a senior market analyst at SBI Securities. “From now, investors will be examining what steps will be taken.”

— With assistance by John Liu, April Ma, Abhishek Vishnoi, Jeanny Yu, and Hideyuki Sano