(Bloomberg) — Chinese stocks rose on Monday as renewed regulatory support from Beijing shielded the market from a broader selloff in Asia.
Most read by Bloomberg
The CSI 300 index rose as much as 2.2%, with a number of stocks including CRRC Corp. and Yunnan Energy New Material Co., rose around the 10% mark. In contrast, the MSCI index of Asian stocks fell as tensions in the Middle East weighed on risk sentiment.
China’s State Council vowed on Friday to tighten listing criteria, crack down on illegal share sales and step up monitoring of dividend payouts. The moves came after Chinese stocks’ recovery lost momentum this month as investors refocused on an uncertain economic outlook and uncertain earnings growth.
“Overseas markets, which are more sensitive to geopolitical risks, saw a sharp decline, in contrast to the onshore market, which is more affected by local policies,” said Shen Meng, director at Chanson & Co. in Beijing. “The new measures can help optimize resource allocation in the capital market and provide solid support for high-quality onshore stocks.”
The onshore gains show that China often responds to different market dynamics. Foreign investors raised more than 7 billion yuan ($967 million) in mainland stocks as of Monday morning.
The CSI 1000 index, an indicator of small-cap stocks on the mainland, still fell on fears that greater market oversight could put the company at a disadvantage. In Hong Kong, the Hang Seng China Enterprises Index fell 1.4% before recovering much of its decline. The MSCI Asia Pacific Index even fell by 1.2%.
Market observers compared the Chinese Cabinet’s statement with guidelines issued in 2004 and 2014 on capital market development. These earlier statements helped usher in a number of market reforms and led to milestones including a registration-based listing system and Stock Connect, according to UBS Securities.
The latest document underscores “policymakers’ high focus on capital market development and reform” and shows that “capital markets are becoming strategically more important to China’s economic development,” Lei Meng, a strategist at UBS, wrote in a note.
In other positive news, shares of China Vanke Co. rose after the developer said it had made plans to address liquidity pressures. The state-supported construction company had to contend with declining sales and increasing liquidity pressure.
Read: China’s data deluge will show whether economic recovery is real
Monday’s rebound, which came after a seven-session decline, helped the CSI 300 pare its April losses. If the momentum continues, the benchmark will post its third monthly advance.
Investors looked for a second move in the Chinese market as the impact of a range of previously announced support measures – from sovereign fund purchases to a crackdown on quant funds – faded.
The latest data points to a patchy economic recovery. Recent bright spots in manufacturing have led economists at banks such as Goldman Sachs Group Inc. to raise their 2024 outlook, but disappointing export, inflation and credit data have caused investors to reassess their optimism.
A flurry of official data expected on Tuesday, including quarterly economic growth and monthly retail sales, will provide a reality check on whether China’s economy has turned the corner.
(Updates with new comments, northbound dates)
Most read by Bloomberg Businessweek
©2024 Bloomberg LP