(Bloomberg) — Chinese stocks rallied across the board as investors bet policy makers will ramp up easing in support of sectors hammered during months of regulatory crackdown and deleveraging.
Technology, developers and financial shares were among the top gainers as the Hang Seng China Enterprises Index rallied 3.8%, snapping a five-day decline. Hong Kong’s benchmark Hang Seng Index also added more than 3% in its best day since July 2020, leading advances in the region.
Investor optimism toward Chinese equities is rising as the central bank has pledged to take further steps to spur the economy, even as the Federal Reserve gears up for tightening. Beijing’s determination to support growth is boosting expectations that a bottom has been reached for beaten-down Chinese stocks, with an increasing number of analysts seeing more rate cuts and calling for double-digit gains in equities.
“Monetary easing through further LPR cuts becomes a catalyst to revive positive market sentiment,” said Banny Lam, head of research at CEB International Investment, referring to Thursday’s cut in loan prime rates by Chinese lenders. “It is just the start of the rally as the size of policy stimulus will be strengthened to prop up growth momentum.”
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The Hang Seng Tech Index jumped 4.5%, with Meituan and Tencent Holdings among those leading gains. The gauge has started 2022 with an advance after losing about a third of its value last year amid Beijing’s clampdown on tech companies.
The rally followed clarification from China’s internet regulator late Wednesday that it’s not asking to approve all investments or fundraising by big tech companies, denying an earlier media report.
A Bloomberg Intelligence gauge of Chinese real estate developers advanced 3.6%, following reports that the government may ease access to some funds. The sector’s gains came even as Thursday’s cut in the five-year loan prime rate left some market watchers disappointed.
Shares of Country Garden Services Holdings Co. and Sunac China Holdings Ltd. surged more than 10% each. The unwinding of some short positions also likely aided the rally in property stocks, traders said.
Agile Group, Shimao Group and Guangzhou R&F have about 20% of their free-float shares sold short, among the highest in the MSCI Asia Pacific Index, according to data from IHS Markit.
On the mainland, the CSI 300 Index was up 0.9%.
“We have been loading up on the low valuation sectors like property, banks, consumers as these may experience the greatest marginal boost from easing,” said Li Xuetong, a fund manager at Shenzhen Enjoy Equity Investment Fund Management Co.
