Hang Seng Outperforms Mainland On Source Reports Pointing To State-Backed Support

Reports of deeper state-backed support for the Chinese equity space promoted a bid in the major China-related benchmarks.

• H-shares were more receptive to the rally than the mainland, with the Hang Seng adding 2.6% and the CSI 300 adding 0.4% come the close. Both indices finished shy of best levels, with a move off lows in core global bond yields and questions surrounding the ultimate impact of the touted measures limiting gains.
• A quick reminder that H shares were trading at a ~15-Year extreme in terms of discount vs. equivalent A-shares, per benchmark measures.
• In terms of the details BBG sources suggested that “China is said to expand a short selling stock ban to insurers.” This looks like the latest leg of support from policymakers/regulators after yesterday’s State Council meeting called for forceful steps re: supporting the market.
• This headline came after an earlier BBG sources piece suggested that “Chinese authorities are considering a package of measures to stabilize the slumping stock market, after earlier attempts to restore investor confidence fell short.”
• The latter piece went on to suggest that China is looking to mobilise ~CNY2tn as part of the efforts, with those funds set to come mainly via offshore accounts of Chinese SOEs, meaning the bulk of the purchases would come via the HK-China Stock Connect links. The sources suggested that at least CNY300bn of onshore funds had also been earmarked for deployment.
• These stories come after well-documented economic worry and derivative-related flow helped pressure Chinese equities in recent weeks, with an apparent eye on market stabilisation ahead of the Lunar New Year period.
• Tech sub-indices outperformed on the news.
• HK-China Stock Connect links saw a light tilt towards net mainland buying for a second consecutive day (CNY3.8bn).