Chinese stocks witnessed a notable recovery on Tuesday, marking the most substantial gain in 14 months, following six consecutive days of decline and a challenging January. The benchmark Shanghai Composite Index surged by 3.23 percent, closing at 2789.49 points, while the Shenzhen Component Index and ChiNext Index both recorded impressive gains of over 6 percent.
The positive momentum comes as state-owned Central Huijin Investment, a key player in the “national team,” pledged to increase investment in the A-share market. This move is strategically timed to alleviate potential liquidity stress. Additionally, China’s top securities regulator has recently considered an “all-out effort” to stabilize the market and crack down on illicit activities.
Analysts interpret these concrete measures as a clear signal of the Chinese authorities’ unwavering commitment to ensuring the stability and healthy development of the capital market. The Tuesday rally reflects a recovery in investor confidence in Chinese equities, with experts suggesting that the market has gradually stabilized after digesting initial panic sentiment. Robust policy support has also contributed to calming investors.
Despite some Western media outlets sensationalizing recent market fluctuations to criticize the Chinese economy, observers dismiss such rhetoric. They emphasize that the long-term positive momentum of the capital market remains unchanged, supported by China’s optimistic economic prospects and the influx of medium- and long-term capital.
The inclusion of the “national team” played a crucial role in stabilizing market confidence, according to analysts. Central Huijin Investment’s announcement to broaden and deepen its holdings in major Exchange-Traded Funds (ETFs) aims at bolstering the stability and healthy operation of the A-share market. The move is seen as an endorsement of A shares, contributing to defusing market financing risks and reversing a deep downturn.
The transaction volume in Shanghai and Shenzhen bourses saw a significant increase, reaching 926.3 billion yuan, representing a swift turnaround from the challenges faced on Monday. Over 3,800 individual stocks rallied, marking a contrast to the previous day when over 4,800 stocks plunged.
The net inflow of “northbound capital” into China’s A-share market set a new record since December 2023, reaching 12.605 billion yuan on Tuesday. This influx of overseas money is a positive indicator for the market.
In response to Central Huijin Investment’s announcement, the China Securities Regulatory Commission (CSRC) voiced its support for the proactive investment approach, emphasizing the A-share market’s current low valuation and its potential for medium to long-term investment. The CSRC issued a total of 13 policy stance statements since Sunday, taking sweeping steps to address various aspects of the securities market and protect investors’ interests.
Experts suggest that these decisive measures from the CSRC are aimed at erasing negativities in the capital market, preventing overselling, and reaffirming the government’s commitment to repairing investor confidence. While some fluctuations may be expected in the short term, there are anticipations of normalized market operations and additional policy boosts in the coming days.
Renowned international investor Jim Rogers expressed optimism about the Chinese stock market recovery, highlighting potential investment opportunities in emerging sectors such as electric vehicles. Officials and analysts stress that Chinese equities offer a great value proposition, considering their price-to-earnings ratio, relative valuation to major overseas markets, and the country’s bullish economic outlook. They urge foreign media outlets to adopt a more objective and comprehensive assessment of the Chinese economy.