(Bloomberg) — Chinese tech shares advanced as Beijing’s renewed pledge to step up growth lured back some buyers after weeks of intense selling.
The Hang Seng Tech Index closed up 2.9% on Tuesday, rebounding from the lowest in more than a month. A rally in other equity gauges across China and Hong Kong lost steam during the day, as traders remained cautious over whether the vows would bear fruit.
Tuesday’s market fluctuations came after fresh policy promises to boost consumption and end a regulatory crackdown on major tech companies as soon as possible. Traders are uncertain about the sustainability of a rebound as Covid-19 lockdowns, dimming growth outlook and regulatory risks on the tech sector all present headwinds.
READ: Skepticism Lingers in China’s Stock Market Amid Lockdown Risks
“When consumption is falling off a cliff in some cities, the government needs to be seen doing something,” said Qi Wang, chief executive officer of MegaTrust Investment. But, “today the problem is not just sentiment, but fundamentals – namely the impact of China’s Zero Covid policy on the economy.”
China’s benchmark CSI 300 Index erased early gains to fall 0.8%, extending Monday’s near 5% slump. The Hang Seng Index ended 0.3% higher.
Traders say they want to see concrete actions after the latest statements from the State Council and the People’s Bank of China. A mid-March rally from a sweeping set of policy vows had nearly evaporated due to a lack of follow-through.
China’s adherence to Zero Covid, the main market drag, is also showing little signs of easing. Beijing started mass testing millions of its residents as part of an unprecedented scheme, raising fears about a potential wider lockdown that could crimp growth and earnings.
READ: Beijing to Test Most of City for Covid as Lockdown Specter Looms
The Hang Seng Tech Index had been particularly hit hard recently as the Federal Reserve’s tightening hurt rate-sensitive growth shares. The Tuesday rebound comes after the gauge’s relative strength index fell near 30 in the previous session, according to Bloomberg data, a level which indicates a security is oversold.
“The stock rebound is more likely due to technical rebound, after shares were heavily oversold,” said Steven Leung, executive director at UOB Kay Hian Ltd. “Any rebound should be limited unless the U.S. bond yield falls further.”
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