Chinese stocks are up in 2023. It somehow ends a year of worries and shows evidence of an economic superpower becoming friendlier to the outside world and its own businesses.
Booming Chinese Economy
Bloomberg reports that since trading started on Tuesday, Jan. 3, the MSCI China Index is up 5.3%, making this year's start the strongest since 2009, following a loss of roughly 24.0% in 2022. Debt-laden real estate developers and tech companies that have weathered the regulatory storm over the last two years sparked the surge.
Investors are flocking back to the world's second-largest stock market as hopes for long-term gains from Beijing's sudden halt to Covid limits outweigh worries over the market's immediate response.
Also, there have been a number of policy shifts that point to a more pragmatic approach to economics, such as proposals for new property assistance, talks to lift a restriction on Australian coal imports, and advancements in the crackdown on Jack Ma's financial tech juggernaut.
The excitement has gone beyond the stock market, driving the yuan to a four-month high and leading to significant gains in the dollar bonds of some of China's struggling developers.
The avalanche of aggressive initiatives directly eliminates some of the pillars of risks for China, said Marvin Chen, a Bloomberg Intelligence analyst, referring to property, geopolitical, and regulatory hurdles.
In a previous report, authorities are exploring additional steps to relieve the liquidity bottleneck hurting certain significant firms systemically. The approval process for private equity firms to obtain capital for residential housing projects has resumed, further boosting morale.
According to statistics by Bloomberg, Chinese developers climbed 5.3% on Wednesday, Jan. 4, its largest advance in over three weeks.
The Market Investors
After officials gave the go-light to billionaire Jack Ma's Ant Group to raise 10.5 billion yuan ($1.5 billion) for its retail subsidiary, shares of other tech titans such as Alibaba Group Holding and Tencent Holdings soared, as well.
It was a major step forward for Ant, whose fate has been symbolic of a two-year crackdown on the tech sector, as it attempts to secure a license to function as a financial holding company.
Investors skeptical of China due to years of geopolitical tensions breathed a sigh of relief as the country's new foreign minister praised the US in unusually effusive terms and as talks began to restart importing some Australian coal after a ban of more than two years.
According to data collated by Bloomberg, overseas investors spent a net of 1.8 billion yuan ($261 million) on Shanghai and Shenzhen equities on Wednesday. In contrast, mainland investors spent the most in three weeks on Hong Kong shares.
Covid infections seem to be reaching a high in certain large Chinese cities, which coincided with their purchase. In a separate attempt to stimulate the economy, the Chinese government has promised to increase fiscal expenditure.
Certainly, others caution against being too optimistic about China just yet.
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