China stocks climb most in two months in holiday catch-up trade

Bloomberg

Chinese shares climbed on their return from a weeklong holiday, with sentiment boosted by Friday’s jump in Hong-Kong listed names and easing concerns about regulatory headwinds for the nation’s battered tech sector.
The CSI 300 Index ended up 1.5% on Monday after rising as much as 2.4%. While that marked the benchmark’s best post-Lunar New Year holiday performance since 2019, its gains trailed the rally seen in Hong Kong markets when they reopened on Friday.
Even as global equities rose when China was shut, stocks on the mainland are seen struggling to keep up with any initial upward momentum given a weakening correlation with offshore markets, unless policy makers take more steps to restore investor confidence. The CSI 300 plunged into a bear market just before the holidays as worries about a weak economy and the property sector’s debt woes outweighed Beijing’s monetary easing.
“Today’s bounce is mostly due to the excessive selling before the holiday, but so far it appears like it lacks staying power,” said Wang Mingxuan, a fund manager at Quant Technology Investment Co. “The market is still taking a wait and see approach and funds are yet to turn proactive.”
Traders returning from their long break are having to contend with challenges ranging from weak local manufacturing and housing data to an expanding camp of hawkish foreign central banks. Economic trends during the festive period — typically a boon for spending and travel — have been disappointing, even with the Winter Olympics.
Domestic tourism revenue falls around 4% from a year earlier, while virus flare-ups and pollution curbs during the games are weighing on consumer and industrial activity. Movie ticket sales for the first four days of the break were down 23 percent from a year earlier to 3.5 billion yuan ($550 million), according to Maoyan data.
“Fewer red packets of ‘lucky money’ appear to have been exchanged in the WeChat groups, the box office on the first day of the new year plunged, and lending stats for January among the biggest lenders were disappointing,” Hao Hong, chief strategist
at Bocom International, wrote
in a note.
In Hong Kong, the Hang Seng China Enterprises Index slid 0.1% after adding nearly 3% on Friday in its first session post the break.
How China’s central bank will manage liquidity after its customary pre-holiday pump priming will also offer clues. The monetary policy divergence between Beijing and Washington — touted as one key reason for global brokerages to turn bullish on Chinese equities — hasn’t yet led to any meaningful gains, with last month’s cut to a key interest rate failing to excite local traders.
State media reports sought to boost investor morale again after concerted efforts with the securities regulator and mutual funds failed before the holidays.
The China Securities Journal said the A-share market is well supported in the medium and long term as investor worries about the economy and policies are expected to ease, while the Shanghai Securities News saw a rally in overseas markets as supportive for local equities.
In currency markets, the onshore yuan was little changed amid a weaker-than-expected fixing by the central bank. Chinese high-yield dollar bonds fell at least one cent on the dollar, according to credit traders.