March 28, 2023

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After Beijing took measures to quell investor panic about rising regulatory risks, Hong Kong and China stock markets rose strongly on Thursday. Taking the lead on the stock market was the tech sector.

The capitalization-weighted stock market index in China CSI 300 Index extended 1.4% during midday. However, it continues to be more than 5% down this week so far. The Shanghai Composite Index witnessed an increase of 1% with the week’s loss narrowing to 4.3%.

Hong Kong’s Hang Seng Index rose 2.7%, while the Hang Seng Technology Index which was in the spotlight rose 6.8%. However, for the week it is still down by 5.3%.

After Beijing issued a ban on commercial tutoring for core school subjects over the weekend, global investors dumped Chinese stocks. An antimonopoly campaign has also been launched by China against the tech giants.

According to some sources, the China Securities Regulatory Commission and officials of leading global investment banks convened for a meeting on Wednesday. The purpose of the meeting was to discuss the financial markets and calm the storm that they had been causing.

Xinhua News Agency, China Securities Journal, and China Daily tried to portray a positive image of the market in a joint effort. They published comments claiming that local stock and bond markets continued to attract investors and that the country was still dedicated to opening up.

The People’s Bank of China injected more liquidity into the banking system through open market operations on Thursday which boosted confidence. It injected more liquidity than it in the daily operations of the preceding month.

The fund manager of Shanghai Jiawen Investment Management Co. Xie Chen also commented on the despair in the market. According to him the despair of the market generates buying opportunities. He further opined that in a tough situation one must be convinced that there would be a brighter tomorrow. Xie himself had purchased shares in Tencent Holding Ltd. earlier in the week when the share prices were falling.

There are some analysts who believe that the recent restrictions on after-school tutoring and internet companies would have sustainable development in the long run.

Shares in tech and education which had borne the brunt of the falling stock prices earlier this week witnessed a strong rebound. The NASDAQ-style subsidiary of the Shenzhen Stock Exchange,  ChiNext Index rose 4.1%, offsetting most of the week’s plunge. Similarly, an index tracking China and internationally listed education stocks rose 4.2%.

However, real estate stocks in China fell due to continued concerns regarding the industry’s financial situation. Amidst fears of rising Covid cases in China, the airline stocks were rather weak reflecting the deterioration of investor confidence.

Overall China stocks have rebounded and left the market split on limits to crackdown on the education industry.

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