Until Wednesday, the Chinese government for more than a year had reined in the stocks of its major technology companies. Those stocks plummeted, especially ones listed on U.S. exchanges.
But on Wednesday, the government changed its tune, saying it would boost stability in capital markets, support U.S. stock listings, ease the plight of property developers and cease its discipline of big tech companies, Bloomberg reported.
It was the first time all these issues were addressed by the government at once.
The comments were light on substance, but that didn’t matter. U.S.-listed Chinese stocks soared. The Golden Dragon Index of those companies has jumped 25% Wednesday.
“China’s top leaders finally broke the silence to respond to the recent market selloff,” Larry Hu, chief China economist at Macquarie, wrote in a report cited by CNBC. “The tone of the [government’s] meeting is strong, suggesting that policymakers are deeply concerned about the recent market rout.”
The Golden Dragon Index has plunged 61% in the past year, even after Wednesday’s surge.
As for individual Chinese stocks listed in the U.S., e-commerce titan Alibaba (BABA) has soared 25% Wednesday, but has dropped 58% over the past year.
Fellow e-commerce giant JD.com (JD) has climbed 32% Wednesday, but has fallen 29% over the past year. Internet company NetEase (NTES) has ascended 21% Wednesday, but has lost 17% over the last year.
The gains came just two days after U.S.-listed Chinese shares plunged, with the Golden Dragon Index falling 12%.
The drop stemmed from several factors.
First, there was concern that China’s close relationship with Russia could backfire on Chinese companies. Russia has reportedly asked China for military assistance.
U.S. officials have said it will take serious action to make sure this doesn’t happen. Investors worry that might include sanctions against Chinese companies.
In addition, China is dealing with another outbreak of Covid, restricting areas around the country, including in Shenzhen and Shanghai.
Furthermore, last week, the Securities and Exchange Commission cited five Chinese companies listed on U.S. exchanges for failing to make their audits available to the regulators.
That could eventually lead to the companies getting delisted from U.S. exchanges.
On Wednesday, China said it's working with U.S. regulators on issues surrounding U.S.-listed Chinese stocks.
