Chinese Stocks Advance as Beijing Renews Regulatory Support

Chinese Stocks Advance as Beijing Renews Regulatory Support

(Bloomberg) — Chinese stocks gained Monday as renewed regulatory support from Beijing shielded the market from a broader selloff hitting Asia.

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The CSI 300 Index jumped as much as 2.2%, with a number of stocks including CRRC Corp. and Yunnan Energy New Material Co. rallying by the 10% limit. In contrast, an MSCI gauge of Asian shares slipped as Middle East tensions hurt risk sentiment.

China’s State Council on Friday pledged to tighten stock listing criteria, crack down on illegal share sales and strengthen the supervision of dividend payouts. The measures came after a recovery in Chinese stocks lost momentum this month as investor focus returned to an uncertain economic outlook and earnings growth.

“Overseas markets more sensitive to geopolitical risks posted a sharp drop in contrast to the onshore market, which is affected more by local policies,” said Shen Meng, director at Chanson & Co. in Beijing. “The new measures can help optimize resources allocation in the capital market and provide solid support to high-quality onshore stocks.”

The gains onshore show how China often operates on different market dynamics. Overseas investors scooped up more than 7 billion yuan ($967 million) of mainland shares as of mid-morning Monday.

A gauge of small-cap mainland stocks, the CSI 1000 Index, still fell on concern stronger market oversight may put then at a disadvantage. In Hong Kong, the Hang Seng China Enterprises Index slid 1.4% before paring much of its decline. The MSCI Asia Pacific Index fell as much as 1.2%.

Market watchers likened the Chinese cabinet’s statement to guidelines released 2004 and 2014 on developing the capital market. Those earlier statements helped usher in a round of market reforms and led to milestones including a registration-based stock listing system and the Stock Connect, according to UBS Securities.

The latest document underscores “policymakers’ high focus on capital market development and reform” and shows “capital markets are becoming more strategically 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. climbed after the builder said that it has made plans to resolve liquidity pressure. The state-backed builder has struggled amid sliding sales and deepening liquidity pressure.

Read: China’s Data Deluge Set to Show If Economic Rebound Is Real

Monday’s rebound, which comes after a seven-session drop, has helped the CSI 300 erase its losses for April. If the momentum holds, the benchmark will notch its third monthly advance.

Investors have been seeking a second act in China’s market as the impact of a range of support measures released earlier — from state fund purchases to a clampdown on quant funds — ran their course.

The latest data point to a patchy economic recovery. Recent bright spots in manufacturing have prompted economists at banks including Goldman Sachs Group Inc. to boost their outlook for 2024, but disappointing exports, inflation and credit data have made investors reassess their optimism.

A deluge of official data due Tuesday, including quarterly economic growth and monthly retail sales, will provide a reality check on whether China’s economy has turned a corner.

(Updates with new comments, northbound data)

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