The struggling Chinese stocks saw their largest single-day gains in two years on Tuesday, and the yuan rose due to a series of signals indicating that authorities are strengthening their commitment to supporting declining markets. The Shanghai Composite Index jumped by 3.2%, marking its biggest daily gain since March 2022. Trading volumes were the highest since May of last year. The Small-Cap Index recorded its highest increase since 2008.
This recovery comes after the country’s key indicators fell to their lowest levels in five years in recent sessions due to concerns about the sluggish economy and the lack of strong policy stimulus measures, similar to those introduced during past crises.
Most of the surge occurred when traders returned from the midday break in the markets after absorbing a slew of optimistic headlines. Bloomberg News reported that President Xi Jinping would discuss the struggling stock market with financial regulators. Authorities also announced additional restrictions on uncovered selling.
Foreign net purchases amounted to 12.6 billion yuan (1.75 billion U.S. dollars), marking the largest single-day influx in the past year. In Hong Kong, the Hang Seng Index rose by 4%, achieving its biggest gains in six months. The Hang Seng Technology Index also increased by 6.8%, its largest surge in over a year. Healthcare stocks rose by 8%, artificial intelligence stocks by 7.4%, and new energy stocks by 6.3%.
The yuan also rose, supported by the central bank’s stricter directives in recent days, reaching 7.1865 against the dollar, up from its lowest level in three weeks recorded on Monday. However, some analysts said that the apparent market recovery is mainly driven by state-backed investors known as the “national team” buying, rather than reflecting a sudden change in investor sentiment, with little evidence that policymakers will soon address structural economic issues such as economic weakness and contraction pressures.
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Shady Fouad is a technical analyst at LDN Company
Shady's strategic vision in the currency markets is reinforced by more than fifteen years of trading experience, which enables him to blend economic and technical analyzes with high efficiency, and find the best investment ideas for traders.
