China Rethinks Gaming Crackdown, HSI Rallies

MNI (London) - The major China-linked equity indices were higher on Wednesday.

• A positive lead from the U.S. helped, although it was the post-Christmas resumption of trade in HK equities that generated the most attention.
• A reminder that the tech sector struggled ahead of the weekend as the latest round of Chinese restrictions on the internet gaming sector caught many by surprise.
• The likes of Tencent and NetEase recovered from last week’s lows after China announced the latest approval of games, along with an apparent regulatory willingness to adjust the draft regulations issued on Friday.
• News of mainland stock buybacks for names operating in the gaming sector also helped.
• The Hang Seng Tech Index added 2.6% as a result, with the benchmark HSI adding 1.7%.
• Note that both NetEase & Tencent operate comfortably below pre-regulation announcement levels, despite the bounce.
• Dynamics surrounding Lenovo, Xiaomi and Huawei provided further support for HK’s tech sector.
• Chinese IT names benefited from government plans.
• Still, the mainland CSI 300 only managed to add a modest 0.4%.
• More broadly, continued focus on enacted Chinese policy easing, retail deposit rate cuts and the prospect of further monetary loosening provided background support.
• The CSRC urged brokerages to crack down of violations of securities lending rules after the close.
• HK-China Stock Connect activity generated a net CNY5.7bn of net inflows for mainland equity markets on Wednesday.