Markets: China stocks primed for bullish reopening after upbeat data

Chinese stocks look set for a strong start as onshore traders return from the Lunar New Year holiday, with a bounce in travel and tourism data providing much-needed relief to one of the world’s worst-performing major markets.

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With trading in mainland China closed from February 9-16, investors will likely take cues from the gains seen in the country’s offshore listed stocks. A gauge of stocks in Hong Kong rose nearly 5% since the reopening on Wednesday, while the Nasdaq Golden Dragon China index jumped 4.3% for the week, leaving little room for onshore stocks to play catch-up.

Spending patterns during one of China’s most important holidays show consumption has surged while the broader economy grapples with deflation and an asset crisis. Market watchers expect the influx of positive data to provide at least a short-term boost to equities, helping authorities’ efforts to revive investor confidence. However, a big question remains over the sustainability of any rebound in the face of a deep economic crisis.

Linda Lam, head of equity advisory for North Asia at Union Bancaire Privé, said: “Early Chinese New Year data, from holiday hotel sales to Macau travel numbers, points to bright spots in service-related industries. Is.” “A-shares should open on a stronger note, with the share price continuing to improve due to state support,” he said, referring to mainland-traded Chinese stocks.

Chinese shares rose in Hong Kong in response to early holiday data that showed a 61% surge in rail trips compared with a year ago, when the country was facing a widespread Covid outbreak. Online hotel booking and delivery giant Meituan also saw a huge increase in spending.

Options data shows traders are becoming more bullish. The 25 delta skew of the Hang Seng China Enterprises Index, which measures the difference between investor demand for puts versus calls, is now in favor of calls for contracts expiring in March. Officials sought to stem equities’ decline ahead of the holiday with state funds ramping up purchases, a series of regulatory changes to ease selling pressure and the sudden replacement of the securities regulator chief. These moves enabled the benchmark CSI 300 index to rebound from a five-year low and climb 5.8% in the week before the holidays. Continuation of the rally will be crucial for the world’s second-largest market, which has fallen out of favor with investors after years of losses. Global money managers are pulling out of Chinese stocks as geopolitical tensions and Beijing’s sweeping controls on the private sector have hit the country’s tech giants hard.

Traders are pinning their hopes on further policy support in the monetary and fiscal sector, apart from a cut in the reserve requirement ratio. Any stimulus signals emerging ahead of key annual meetings in March, where leadership announces economic growth targets and development goals, will be closely watched.

China’s central bank kept key interest rates steady on Sunday as it seeks to keep the yuan from wide swings while assessing the impact of recent support measures. The People’s Bank of China kept the rate on its one-year policy loan unchanged at 2.5%, as expected by most economists surveyed by Bloomberg.