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China stocks rallied on Thursday in what was largely seen by market watchers as a technical rebound amid expectations of policy easing by the central bank. The Hang Seng China Enterprises Index of major mainland companies listed in Hong Kong jumped as much as 2.3% before finishing the day up 1.4% — the most in two weeks. It had fallen in each of the previous four straight sessions. The Hang Seng Tech Index climbed more than 2% while on the mainland, the benchmark CSI 300 Index rose 0.6%.
“It looks like a retracement from the recent selloff, not a turn in direction,” said Redmond Wong, market strategist at Saxo Capital Markets HK Ltd. Investors should “keep the powder dry” and look for a better opportunity to enter the market, he said. A top Chinese central bank official said earlier this week that the authority is prepared to keep policy loose by lowering the amount of money banks must keep in reserve. Thursday’s bounce came amid a positive backdrop as global equities advanced ahead of US inflation data that will likely offer more clarity on the path for the Federal Reserve’s interest rates.
Meanwhile, the People’s Bank of China pushed back against recent yuan weakness by setting its daily reference rate for the managed currency at the widest gap to estimates since November.
Foreign investors were buyers of onshore Chinese shares worth 4.2 billion yuan ($586 million) on a net basis in Thursday’s session. The CSI 300 Index earlier in the week slumped to its lowest level since February 2019 after capping a record third straight annual drop in 2023.
Years of harrowing losses have diminished China’s standing in global portfolios as concerns over a slowing economy and a persistent property sector crisis drove investors away. An analysis of filings by 14 US pension funds with investments in Chinese stocks show most of them have reduced their holdings since 2020.