Chinese equities rally amid new policy guidance

Chinese equities edged up on Monday, with all three key indexes staging gains of more than 1 percent. The rally came amid a panic selloff sweeping across other major Asian stock markets that have been fueled by escalating geopolitical tensions in the Middle East region.

The jump came after China’s State Council, the cabinet, on Friday issued a nine-point guideline – the third of its kind in history – which aims to strengthen supervision, tackle risks and promote the high-quality development of the country’s capital market.

The unprecedented move signaled that the capital market is moving into a new stage of stringent supervision that prioritizes stability, according to analysts. Although it would take time to shore up investors’ confidence, analysts noted that the document will lay a solid foundation for China’s stock market to recover further.

Chinese industry observers attributed Chinese equities’ Monday gains to the nine-point guideline issued on Friday, which they said carries great significance in boosting investors’ long-term confidence as it clearly showed how the country will build a regulated, transparent, vigorous and resilient capital market in the years to come.

“There are also hopes that the document would lead to more policies and support that could sustain a similar equities market boom like in the previous rounds,” said a public equity manager surnamed Zhu, based in Shenzhen, South China’s Guangdong Province.

Yang Delong, chief economist at the Shenzhen-based First Seafront Fund, told the Global Times on Monday that the main purpose of the new document issued on Friday is to address deep-seated issues that weigh on the high-quality development of the capital market.

Investors are also gauging clues on the Chinese economy’s recovery prospects this year. “But it could restore the valuations of quality stocks and from a long-term perspective, the market could gradually embark on a path to further recovery,” Yang said.