Foreign-listed Chinese shares jump as Beijing soothes nerves

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(Reuters) – Foreign-listed Chinese shares rallied on Wednesday after Beijing vowed to keep markets stable, soothing overseas investors’ nerves after a sell-off due to worries over differences between China and the West in the Russia-Ukraine war.

Remarks by China’s Vice Premier Liu He who said Beijing would roll out support for the economy and keep markets stable sparked a bounce from 21-month lows for local equities, also fuelling a rally for U.S.- and Europe-listed Chinese shares.

JD (NASDAQ:JD).com was up 23%, Alibaba (NYSE:BABA) advanced 16% and Pinduoduo (NASDAQ:PDD) jumped 35% in early U.S. trading, after they all fell to multi-year lows during Tuesday’s sell-off. The iShares MSCI China exchange-traded fund was last up about 14%.

Gaming company NetEase (NASDAQ:NTES), online video platform IQIYI, music-streaming company Tencent Music, and mobile game publisher Bilibili (NASDAQ:BILI) saw similar outsized moves, while Amsterdam-listed Prosus (OTC:PROSF), which owns a 29% stake in the Chinese tech giant Tencent, also gained sharply.

Citibank’s Asia-Pacific trading strategist in Hong Kong, Mohammed Apabhai, likened the moment to the Federal Reserve’s market backstop in 2020 or then-ECB chief Mario Draghi’s “whatever it takes” speech that staunched the eurozone crisis in 2012.

“It’s not quite of that order of magnitude, but it’s not that far away either,” he said.

“Easing that the market was expecting wasn’t actually coming through. But now it seems like China has realised that the need to do something to support the economy, something proper.”

The gains also reflect investors looking to pick up bargains after Chinese equities have seen severe selling pressure in recent days. Hong Kong stocks fell to a six-year low on Tuesday.

“Although it is still a volatile and somewhat opaque market, I think this is the right moment to look at Chinese stocks because valuations are good and macro data are recovering,” said Giuseppe Sersale, fund manager at Anthilia in Milan.

Frankfurt-listed depository receipts for Alibaba were among the most traded stocks on the Tradegate and Lang & Schwarz platforms, suggesting interest from German retail investors.

According to Vanda (NASDAQ:VNDA) Research, which tracks retail flows, appetite for China ADRs has picked up the most since September 2021 with net purchases over the last 10 trading sessions topping $500 billion, the highest level in over six months.

Separately, China’s securities regulator said it would continue to communicate with U.S. regulators and strive to reach an agreement on China-U.S. audit supervision cooperation as soon as possible.

The speed at which Beijing has responded to this week’s sell-off would suggest it does not want to let things drift out of control, said AJ Bell investment director Russ Mould in London.

“Its key goal is common prosperity and stock markets matter because a lot of Chinese retail investors have money in equities, so their wealth is at stake if shares are plummeting in value,” he said.

Some analysts see Chinese stocks as a possible good long-term investment, following a torrid 2021 amid a crisis in the real estate sector and a severe regulatory crackdown on tech giants.

The MSCI China index currently trades at a valuation discount of around 36% to world stocks, twice as much the 20-year average discount, per Refinitiv data.

Graphic: China stocks discount: