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(Bloomberg) — Chinese stocks edged higher as domestic traders returned from the Lunar New Year holiday, sparking market caution as strong travel and spending data offset the spread.
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The benchmark CSI300 index was up 0.5% as of 10:56 a.m. local time on Monday, defying expectations for a strong start after the February 9-16 holiday. Hong Kong stock indexes have risen nearly 5% in three sessions since trading resumed on Wednesday, while the Nasdaq Gold Dragon China Index rose 4.3% last week.
Monday morning’s trading showed that deep doubts persist over the long-term prospects of China’s market, as the economy struggles with deflation and a real estate crisis. Investors are betting on a rebound in the domestic market after state media reported that the number of domestic tourists during the eight-day holiday period was around 474 million, an increase of 19% compared to the same period in 2019 before the pandemic. I was expecting.
“Onshore markets may resume with some positive momentum after better-than-expected holiday consumption data, but given the strong rebound into the holiday season,” said Marvin Chen, strategist at Bloomberg Intelligence. “Further measures will then be needed to maintain it.”
Mainland stocks had risen ahead of the holiday as authorities sought to restore investor confidence, with increased purchases using state funds, a series of regulatory adjustments to ease selling pressure, and a sudden change in the head of the securities regulator. . The benchmark CSI300 index rebounded from a five-year low, rising 5.8% in the week before the session.
At a State Council meeting on Sunday, Premier Li Qiang called for “real and strong” action to boost confidence in the economy, highlighting the government’s concerns over the sluggish economic recovery and falling stock prices.
“It is noteworthy that this year’s Lunar New Year holiday lasted for eight days compared to seven days in 2019,” said Redmond Wong, market strategist at Saxo Capital Markets. “Additionally, average tourism spending per trip also decreased from 2019 levels.”
Foreign investors had sold more than 3 billion yuan ($416 million) in mainland stocks as of mid-morning. Global funds are exiting Chinese stocks and seeking alternatives in other markets such as India and Japan.
Traders are hoping for more policy support across the monetary and fiscal sectors, on top of the reserve requirement cuts already in place. China refrained from lowering its key policy interest rate on Sunday as the People’s Bank of China seeks to prevent fluctuations in the yuan. Some economists expect commercial lenders to cut loan prime rates on Tuesday.
Tech stocks in the CSI300 index stood out on Monday. Chinese artificial intelligence companies reacted to OpenAI’s announcement of Sora, a new system that can create realistic-looking videos, with shares of Cambricon Technologies and Zhongji Innolight soaring more than 8%. Healthcare stocks fell the most.
In Hong Kong, the Hang Seng Chinese Enterprise Stock Index fell more than 1%, rising for the third day in a row.
Dickie Wong, executive director of research at Kingston Securities, said, “Today’s Hong Kong market is seeing some profit-taking in Macau casino operators and other companies following strong data from the Lunar New Year holiday.” Stated. Mr Wong added that the prime rate for five-year loans could be lowered.
A new survey of asset managers by Bank of America Corporation reveals that shorting Chinese stocks has become popular in recent months, making it the second-busiest trade. Ta. A third of respondents said they would increase their allocation if more aggressive fiscal policy was expected to support the real estate sector.
Any signs of stimulus will therefore be closely watched ahead of the country’s key annual meeting in March, when the leadership will announce its economic growth and development goals.
“In terms of tourist spending, most of it comes from traffic, and when you look at average spending, austerity is still there,” said Forsyth Barr Asia analyst Willer Chen. .
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–With assistance from Charlotte Yang.
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