By Sherry Qin
Chinese shares notched their best day in years after Beijing signaled its intent to prop up the battered equities market, including by directing a trillion-dollar sovereign wealth fund to boost holdings.
The benchmark Shanghai Composite Index gained 3.2% Tuesday, snapping a six-day losing streak with its largest single-day percentage gain in almost two years, while the Shenzhen Composite Index gained 5.1% -- its best day since 2019.
In Hong Kong, the blue-chip Hang Seng Index advanced 4.0%, while the local technology index, which tracks the performance of companies including Alibaba, JD.com and Tencent, surged 6.7%.
The gains came as Chinese authorities unveiled new actions aimed at shoring up ailing markets.
Central Huijin Investment, a unit of the US$1.24 trillion China Investment Corp. sovereign wealth fund, said it would buy more exchange-traded funds, expand the scale of its holdings and "safeguard the stable operation of the capital market."
China's securities regulator said it would "create more convenient conditions and smoothen channels" for Central Huijin to conduct market operations. The China Securities Regulatory Commission added that it would bolster efforts to "coordinate and guide various institutional investors" to enter the market, without elaborating.
In a separate statement, the CSRC also said it had advised China's listed companies to make full use of "the tool box" available to them to boost investor confidence and market stability, including conducting share buybacks, boosting major shareholder's stakes and declaring regular dividends.
Also boosting sentiment was a report by Bloomberg that President Xi Jinping plans to meet with Chinese market regulators to discuss market conditions and recent policy moves. The CSRC didn't immediately reply to requests for comment by Dow Jones Newswires.
Taken together, the flurry of news suggests a new urgency in Beijing over the state of China's equities markets, analysts said.
"The shifting focus from authorities toward stabilizing the markets provides a catalyst for extreme bearish sentiments in Chinese equities to unwind," said Jun Rong Yeap, market strategist at IG. The "string of intervention efforts suggest that the sharp underperformance of Chinese equities may be nearing authorities' tolerance limit."
Still, like a recent smattering of efforts to boost China's troubled property market, the measures by themselves may only provide a short-term boost to equities, analysts said.
"They won't do much to shift the needle long-term," said Sonija Li, head of retail research at Maybank. "These moves can ease selling pressure in the near term, but cannot bring [about] fundamental changes."
Jefferies analyst Shujin Chen said Huijin's plans to expand the scale of its holdings could give small-cap stocks a lift in the short term, but that "we need to await more concrete measures and policies to decide if the market has reached a turning point."
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
02-06-24 0620ET
