Chinese stocks extend gains after Biden-Xi meeting at G20

Chinese stocks rallied on Tuesday after Joe Biden and Xi Jinping signaled a desire to improve US-China relations at a meeting ahead of the G20 summit.

Investors also welcomed signs that Beijing was partially easing some of its pandemic measures and offering support to the real estate sector, despite China releasing data last month showing slower factory output growth and a drop in retail sales.

Hong Kong’s Hang Seng Index rose as much as 4.2 percent and China’s CSI 300 rose as much as 2.1 percent. Elsewhere in Asia, Japan’s Topix rose 0.4 percent and South Korea’s Kospi was flat.

The Hang Seng Tech Index rose as much as 7.8 percent, with internet giants Alibaba and Tencent up about 11 percent and 10 percent, respectively.

Investors were discouraged last month when Xi appointed loyalists to top leadership positions and vowed to stick to tough coronavirus policies at the Communist Party Congress.

On Monday, Biden and Xi used their first face-to-face meeting as leaders to offer a more constructive note on ties after relations between the two superpowers plummeted to decades-old lows.

Additionally, Beijing’s recent moves to slightly ease some pandemic containment measures and offer support to the property sector have boosted hopes that the world’s second-biggest economy is gradually emerging from a prolonged slowdown.

“While our long-term concerns about China remain, tactically we turn constructively to China equities,” Bank of America analysts wrote in a statement.

“There is a slight hint of panic as authorities roll out further measures to ease Covid restrictions and ease financial conditions for the real estate sector and SMEs,” Jefferies analysts said.

“The biggest single winners of the authorities’ about-face are consumer stocks,” they said, adding that policies will be relaxed ahead of the Chinese New Year, the country’s biggest holiday, which falls on Jan. 22 next year.

However, analysts warned that growth would remain subdued. “China’s near-term cyclical recovery is positive, but we don’t find valuations compelling enough to go overweight,” said analysts at BlackRock Investment Institute, adding that they are now neutral on Chinese equities.

“Activity is resuming but we see growth in 2022 below official targets.”

US stocks fell on Monday on news of Amazon’s planned job cuts and as investors weighed the prospects for rate hikes following comments from Federal Reserve officials.

The S&P 500 lost 0.9 percent on Monday and the Nasdaq Composite fell 1.1 percent.

FTSE 100 futures were down 0.2 percent, while contracts for the Euro Stoxx 50 were up 0.2 percent, indicating a mixed start in Europe.

Oil prices fell with Brent crude, the international benchmark, down 0.6 percent to trade at $92.63 a barrel.

https://www.ft.com/content/adbc2319-4ea7-4b35-a00a-258cba2fb21d Chinese stocks extend gains after Biden-Xi meeting at G20

Adam Bradshaw

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