Chinese stock markets rallied today on the news that state authorities have pledged to keep the markets stable and continue to support overseas stock listings for companies.

This led to the Chinese Hang Seng technology index gaining over 20% and the Hang Seng main composite index gaining 9%. 

Chinese stocks have been under pressure over the past year as regulation has increased in certain sectors. Technology & Education stocks have been hit the hardest as the Government continues to push its agenda of opportunities for all and reduce the impact of technology and gaming on children.

It also highlighted how it wanted to crackdown on foreign investment within Chinese technology companies. 

Very recently there has been further pressure on Chinese stocks as COVID cases have increased, and areas of the country have implemented lockdowns due to the zero COVID policies in place. Longer term lockdowns will put pressure on companies and could hamper growth moving forward. Finally, China’s links to Russia have also added fuel to the fire as many investors have been worried that sanctions could impact China, especially if they continue to back President Putin and go against the US. 

The coordinated release of the statements by the state council, China’s central bank and its banking & insurance regulator, have all pledged the importance of stabilising the Chinese market. They have provided some positive clarity on technology stock listings in the US and the ending of the technology crackdown on internet platform companies. There was also some positive news released on new policies to handle property developers risks which will have a large impact due to the importance of the property sector for the Chinese economy. 

There are still risks for China due to COVID cases and lockdowns, slowing growth and the on-going regulatory risks. However, the news today does seem like the tide may be turning for China. Recent data released regarding fixed asset investment and growth beat estimates, highlighting a change may be occurring soon. 

Investors had been hoping that stimulus measures would be announced by the government post the completion of the National Peoples Conference. With valuations cheap in the region compared to recent history, today’s news has provided an opportunity for investors looking to make purchases in the region. This is only the start, and it is believed that further targeting will come through monetary policy easing, with specific targeting to sectors including the property market and technology over time.