Benchmark indices in China and Hong Kong popped strong gains on February 6 as the measures undertaken by Chinese regulators to arrest the stock market cheered investors.
China's benchmarks CSI 300 index settled 3.5 percent higher at 3,311.69, while the Shanghai Composite close 3.1 percent up at 2,789.49. Both indices registered their biggest single-day gains since 2022. Similar optimism was seen in Hong Kong’s Hang Seng index, which surged 4 percent to close at 16,133.60.
China's CSI 300 had slumped to its lowest level in five years last week.
In an effort to bottom out the recent slump in China's stock market, regulators tightened trading restrictions on domestic institutional investors as well as some offshore units.
This week the regulators restricted certain brokerages' cross-border total return swaps with clients, which serves as a channel for China-based investors to short Hong Kong stocks, a Bloomberg report said.
Simultaneously, certain Chinese brokers utilising this channel to purchase mainland shares for their offshore entities were instructed not to decrease their positions, the report added.
Also Read | China's market restrictions won't help, may be bad for EMs, no immediate impact on India
Some quantitative hedge funds were also prohibited from placing sell orders beginning February 5, while others were prevented from reducing stock positions in their leveraged market-neutral funds, the Bloomberg report said.
While the rescue efforts may have been hailed by local investors, analysts across the globe are skeptical of the move. On that account, analysts also believe that the jump in Chinese stocks is a result of the squeezing of short position and doesn't signify a trend reversal. They believe the economy as well as the stock market is likely to remain under pressure in the foreseeable future.
Ritesh Jain, co-founder of Pinetree Macro, told Moneycontrol the restrictions placed by the Chinese government isn't a good move for the country because restrictions never work. "Every time they put restrictions they reduce the confidence or investors," he said.
Stocks in Asia-Pacific remained under pressure as investors remained cautious over expectations of a rate-cut by the Federal Reserve. This comes after Fed Chair Jerome Powell said the US central bank was not in a hurry to initiate rate-cut, shattering hopes of such a move in March.
Markets in Japan, South Korea and Singapore closed with losses.
Also Read | China tightens trading restrictions for domestic and offshore investors
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