China Index in Hong Kong Rebounds After Touching Bear Territory

Buyers tiptoed back into the market after a gauge of Chinese stocks listed in Hong Kong briefly dipped into a bear market as investors weighed Beijing’s latest crackdown on the tech sector.

The Hang Seng China Enterprises Index closed 0.6% higher on Friday. It dropped as much as 1.4% in morning session, extending at one point the loss since a February high to over 20%. Meituan was the biggest driver behind the reversal, swinging from a decline of 3.6% to a gain of 4.3%. Tencent Holdings Ltd. also bounced back to become another top contributor to the gauge’s increase.

The rebound followed a losing streak of eight sessions that had sent some former investor darlings, including Tencent and Kuaishou Technology, into oversold territory. Hopes for monetary easing in China are on the rise after the country’s cabinet signaled earlier this week that the economy needs additional central bank support, with government data pointing to cooling domestic price growth.

“Beijing is adopting a more pro-growth stance,” which will boost credit growth and ease market worries about liquidity, UBS Global Wealth Management strategists led by Mark Haefele wrote in a Friday note. They are maintaining a “most preferred stance” on Chinese equities, citing factors including expected pro-growth monetary policy, attractive stock valuations after recent pullbacks, and estimated higher earnings growth than their global peers next year.

China Index in Hong Kong Rebounds After Touching Bear Territory

China’s benchmark CSI 300 Index ended 0.4% lower Friday, narrowing an earlier decline of 1.6%. The broader Asia Pacific region also pared losses after sliding 1.6% in morning trading on growing anxiety that the spread of the Covid-19 variants could hamper the global recovery.

Hong Kong’s benchmark Hang Seng Index finished up 0.7%, marking its first increase in nine sessions. For the week, it still fell 3.4%, the biggest loss since late February.

China’s tech sector saw renewed selling pressure this week, as the country’s regulators announced a crackdown on Didi Global Inc. just days after the ride-hailing giant pulled off one of the biggest U.S. initial public offerings of the past decade. Investors fear that more troubles may be ahead for other companies as Beijing mulls further rule changes that would allow them to block Chinese firms from listing overseas.

“Investors have priced in a lot of bad news,” said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. “But to see a real stabilization, the market will need more regulatory clarity on the crackdown, as many people are still worried.”

©2021 Bloomberg L.P.

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