Everything Is Suddenly Going Right for China’s Stock Market

(Bloomberg) — Chinese stocks extended their sharp November rebound as moves by authorities to address the property crisis and signs of reduced US-China tensions boosted investor sentiment.

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The Hang Seng China Enterprises Index climbed as much as 4.8% to head for a third day of gains. It rose nearly 2% in the previous session, taking advance from a recent low on Oct. 31 to more than 20% and meeting the common definition of a technical bull market. The Hang Seng Index, Hong Kong’s benchmark, was poised to hit the milestone as it rose more than 4% Tuesday.

An acceleration of moves to ease a cash crunch in the real estate sector, as well as a relaxation of virus curbs in the past week have surprised investors, signaling that reviving economic growth has returned as a policy priority. Also brightening the mood was Monday’s meeting between Xi and Joe Biden that generated hopes of warmer ties between the two superpowers.

“China appears to be rapidly addressing all the major issues on investors’ minds, such as Covid Zero, real estate slump and US relations,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Taken together these also mitigate the broader concern that China may become more ideological, less pragmatic and increasingly isolated post the 20th Communist Party Congress.”

The rally in China marks a sharp reversal of sentiment toward a market that was mired in pessimism late last month when President Xi Jinping’s precedent-defying power grab stoked concern about ideology trumping pragmatism.

In addition to property stocks, Chinese tech firms also joined the party as expectations grew that the worst may be over for some of the industry’s major players.

The Hang Seng Tech Index jumped more than 7% Tuesday, as bets intensified that communication between Sino-American leaders will reduce the risk of delisting of Chinese companies from the US.

“Although the meeting contained no dramatic breakthroughs, there was some progress worth noting that should be positive for Chinese equities,” said Dillon Jaghory, an analyst at Global X in New York, referring to the Xi-Biden meeting. “Channels of communication between US-China regulators are crucial to reducing the risk of delisting of China ADRs. Increased engagement should help to mitigate political risk from the US side for Chinese equities.”

–With assistance from John Cheng, Yiqin Shen and Chloe Lo.

(Updates prices throughout and with fresh analyst comment)

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