As the world focuses on oil and Ukraine, China’s markets are swinging wildly

Chinese stocks staged a late rebound in yesterday’s session amid speculation that the central bank may soon ease further monetary policy after Beijing vowed to stabilize financial markets, but it came after a week of the most extreme volatility in decades.

Expectations that the People’s Bank of China would take more steps to boost the economy in the near future led to a rebound in the afternoon, traders said.

One tool could be lowering banks’ reserve requirements, they said.

The Hang Seng gauge of Chinese stocks rose 21 percent in the last two sessions, the highest since 1998, when authorities made a concerted effort to boost confidence after a historic defeat.

Friday’s trading caps another wild week for Chinese stocks, with investors selling off shares in the first two days, not least because of the risk of fresh US sanctions on the Asian nation over its close ties with Russia.

While Beijing’s vows to support markets have sparked an impressive turnaround over the past two sessions, geopolitical concerns remain a key factor for investors.

Traders are excited about the planned meeting between Chinese President Xi Jinping and US President Joe Biden later in the day.

“These are difficult times. Traders and investors should be immediately aware of the risk posed by this important historic phone call,” Clifford Bennett, chief economist at ACY Securities, wrote in a note, adding that a US decision to impose new sanctions on China is the most recent Stocks could wipe out profits.

“It’s a revealing moment.”

According to several people familiar with the matter, China’s muted response to Russia’s invasion of Ukraine has hardened views within the US administration that Mr Xi may be moving closer to Moscow’s support while the conflict rages on.

Beijing denies having tacitly supported the invasion and dismisses US reports that Russia asked China for financial and military support soon after the war began, calling it disinformation.

Some market observers are more optimistic.

“I am confident that the meeting between Mr. Xi and Mr. Biden will send positive signals of calming down in Sino-US relations, which will help stabilize market sentiment,” said Dickie Wong, executive director of research at Kingston Securities.

A Bloomberg ad from Chinese developers posted a third day of gains a record 16 percent increase on Thursday.

Ping An Insurance Group Co. was the top performer on the Hang Seng, which ended down 0.4 percent after falling as much as 2.7 percent in the morning session.

While the Hang Seng Tech Index fell 1.9 percent on Friday, the gauge’s weekly gain was its biggest since October, up 5.6 percent.

Turnover of an ETF in China that tracks the tech measure rose to 8 billion yuan yesterday, more than triple the daily average this year.

Investors are also growing more hopeful that China will adjust its Covid restrictions.

Mr Xi has pledged to reduce the economic impact of his measures to combat Covid, signaling a shift in a long-standing strategy that has minimized deaths but weighed heavily on the world’s second-largest economy.

Options traders bet on more gains for Hong Kong stocks, with the Hang Seng Index’s put-to-call ratio, which measures demand for bearish versus bullish options, falling to around the market’s 2008-09 low.

“As markets await policy action, stock prices could see further ups and downs. But at least we’ve now confirmed a “political bottom,” said Li Yan, senior market analyst at SBI Securities. “From now on, investors will consider what steps are being taken.”

“Judging by just the stock movements, it looks like people are trading with the possibility of a rate cut,” said Shi Junbo, fund manager at Hangzhou Xiyan Asset Management Co.

“Right now it’s all conjecture, but if there weren’t any speculation then there wouldn’t be any moves like this.”

A growing number of economists also expect lenders to lower their quotes for the policy rate, the de facto benchmark for lending, which is due to be announced by the PBOC on Monday.

Foreign investors net buyers of Chinese stocks for a second day yesterday, net buying 8.5 billion yuan ($1.3 billion) of mainland stocks through trade links with Hong Kong.

The Hang Seng China Enterprises Index closed down just 0.6 percent from a previous loss of up to 3.6 percent.

Financials, real estate and technology stocks were among the best performers. China’s benchmark CSI 300 index reversed early declines to end 0.7 percent higher. As the world focuses on oil and Ukraine, China’s markets are swinging wildly

Fry Electronics Team

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