Chinese stocks in Hong Kong have posted their best week in more than seven years, amid rumours that the country could begin reopening to the rest of the world early next year and reports that US regulators had completed a review of Chinese audit papers earlier than expected.
Hong Kong’s Hang Seng China Enterprises index rose 6 per cent on Friday, while the CSI 300 index of Shanghai and Shenzhen-listed shares jumped 3.3 per cent. The leap for the China Enterprises index left it up 9 per cent for the week, the biggest rise in seven years.
Market sentiment was bolstered by rumours circulating on social media that Zeng Guang, the former head of the Chinese Center for Disease Control and Prevention, had said at a conference held by Citigroup that the country could reopen its border with Hong Kong in early 2023, with more relaxations on international border controls to follow.
Citi declined to comment on his alleged remarks.
Separately, traders said shares were getting a lift from a Bloomberg report, citing unnamed sources, stating that a US review of Chinese corporate audit papers in Hong Kong had finished early. It was viewed as a sign of progress in the process to prevent the US delisting of hundreds of stocks, from Alibaba to Yum China.
However, US-based WisdomTree Asset Management said it had been shifting its holdings out of Chinese companies’ US-listed shares and into their Hong Kong stocks.
Liqian Ren, who manages the fund’s China investments, said the moves reflected expectations that more risks were likely to arise in the delisting process, even if the US Public Company Accounting Oversight Board audits were successfully completed in this round. “I’m not optimistic on the China-US relationship . . . there will be more coming from the US side,” she said.
The gains for Chinese shares also came as German chancellor Olaf Scholz met President Xi Jinping in the Great Hall of the People in Beijing, marking the first visit by a head of state from the G7 group of nations to China in three years.
Analysts and traders said the jump for China stocks in Hong Kong this week had been heavily driven by mainland Chinese investors, many of whom were seeking to “buy the dip” in the wake of a summit of global financiers in the city this week, and after share prices in the city fell to 13-year lows.
Calculations by the Financial Times based on exchange data show mainland investors bought roughly $3.7bn worth of Hong Kong-listed stocks this week.
“After the summit, there has been a clear tendency of money flowing into Hong Kong stocks from mainland China,” said Dickie Wong, head of research at Kingston Securities. Wong added that the visit by Scholtz had bolstered hopes for a quicker reopening by China that would boost economic growth, following years of disruptive zero-Covid measures.
After his meeting with Xi, Scholz announced that Beijing had agreed to import Covid-19 messenger RNA vaccines for foreign expatriates living in China, a move that could pave the way for approval for their use for Chinese nationals.
China is yet to grant an mRNA vaccine approval for widespread use, instead relying on domestic jabs that provide lower levels of protection than the one developed by the German company BioNTech.
Beijing has cited low levels of public immunity against the virus as one justification for continuing its strict zero-Covid policy.
Chinese equities have swung sharply in recent sessions, amid a back-and-forth of rumours suggesting that a pivot away from Xi’s stringent Covid policy is imminent, and official pushback stating that this is not the case.
Shares had risen early in the week on unsubstantiated rumours that Beijing had formed a committee to look at easing its containment policies next year, then dipped on Thursday after China said it would stick “unswervingly” to zero-Covid.
Even after the rise on Friday, however, China’s benchmark CSI 300 index is still down 33 per cent this year, once the depreciation of the renminbi against the dollar is taken into account.