Home Financial Record Chinese stocks up in the U.S., erasing most of the record sell-off

Chinese stocks up in the U.S., erasing most of the record sell-off

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(Bloomberg) – Chinese stocks in the United States extend their rally after a record sell-off on Monday, as Beijing’s pledge to support its financial markets boosted investor confidence and retail traders bought the decline.

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The Nasdaq Golden Dragon China Index rose 7.2% on Wednesday, taking its two-day gain to 12%, the largest since April. The index has erased most of its losses from Monday, when it fell 14%. Among the best performers, Alibaba Group Holding Ltd., JD.com Inc. and Pinduoduo Inc. jumped more than 8%, while Lufax Holding Ltd. rebounded 13%.

Some investors saw a glimmer of hope after China’s central bank and foreign exchange regulator pledged to ensure the healthy development of financial markets and reiterated that the yuan would be “fundamentally stable”. The comments followed President Xi Jinping’s tightening of control over the government, which raised fears among foreign investors that his strategy could stifle the country’s economy and private enterprise.

The offshore yuan jumped a record high, joining a broad rally against the dollar as investors bet the Federal Reserve will moderate the pace of its rate hikes. The strength of the decision surprised traders, who also said they saw Chinese banks selling the greenback to help rebound the currency from an all-time low.

“While sentiment is expected to remain depressed and markets may remain volatile until concrete policy action emerges, supportive growth announcements could lead to strong gains, as happened in May or June,” wrote Mark Haefele, chief investment officer of UBS Global Wealth Management, in a note. Wednesday.

The risks and rewards of Chinese equities are balanced, and investors should consider sticking to the benchmark allocations for Chinese equities rather than going underweight, according to Haefele. “Those with a lower allocation might consider buying on dips, and we continue to recommend positioning in resilient earnings sectors given the prevailing headwinds,” he wrote.

That’s exactly what some traders did in Monday’s epic selloff. U.S. certificates of deposit from Chinese companies were among the most bought stocks this week as retail investors looked to “buy the dip,” Vanda Research analysts, including Marco Iachini, wrote in a note Wednesday.

Retail investor buying of major Chinese ADRs on Monday surpassed levels last seen during the Shanghai shutdowns in March, with more than $157 million in net flows, according to Vanda. Alibaba, Nio, and Pinduoduo were the top recipients with $92 million, $32 million, and $12 million in net inflows respectively, the report said, noting that Alibaba attracted nearly 60% of inflows that day- the.

Yet China’s stock markets remain fragile and risk being bogged down by the nation’s Covid-zero policy. Reports of a lockdown in one of Wuhan city’s central districts dealt a major blow to indices in China and Hong Kong early on Wednesday.

–With help from Matt Turner.

(Adds a paragraph on the yuan.)

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