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China pledges support for economic stability, Asian market prospects brighten

The Hang Seng TECH Index (HSI.I) seems to be on the mend and has grown higher this Thursday morning by over 5% after an astonishing 9% increase yesterday. The Hang Seng TECH Index likewise has made a sharp turn for the better with an increase of 22%. Both came just after China’s Vice Premier Liu He’s pledge for the support of market stability and accommodative policies.

China’s Financial Stability and Development Committee also encouraged long-term institutional investors to increase their shareholdings. They promised to communicate closely with Hong Kong regulators to maintain stability in the city’s financial market and pushed to shore up first-quarter economic growth in mainland China by taking ‘substantial measures’ to combat existing pressures.

At the same time, the Committee mentioned they were co-operating with US regulators to see how they can best support overseas Chinese enterprises, particularly those listed on American indexes. Stating that ‘market fluctuations are not good for anyone’, they announced that more supportive monetary policies are on their way to curb concerns and improve market outlook.

These statements have had a tremendous effect on the East Asian technological landscape. Aside from the sudden growth in Hong Kong 30 largest technological companies, boosting the Hang Seng TECH Index, Chinese tech ETFs also gained immediate traction and saw a surge of over 20%. Among the ETFs that have seen great jumps were Invesco China Technology ETF (NYSEARCA: CQQQ) which increased by 17.2%, iShares MSCI China ETF (NASDAQ: MCHI) which increased by 13.2%, and iShares Large-Cap ETF (NYSEARCA: FXI) which increased by 12.5%.

This is a far cry from the dismal market landscape in Hong Kong and mainland China from just a few days ago, when China announced two city-wide COVID lockdowns in Shenzhen and Shanghai because of flare-ups of Omicron clusters.

Just a stone’s throw from Hong Kong and home to the Yantian port – the fourth largest in the world – Shenzhen is China’s leading technology hub. Its current lockdown has halted production for various companies and suppliers, including Apple’s Foxconn and tech giants Tencent and Huawei Technologies, the latter of which are both based in the city. Disruptions in supply chains range from phones and computers to semiconductor chips and headphones, and they have plagued business owners and sent Chinese tech stocks plummeting. 

In Shanghai, China’s wealthiest and most populous metropolis, officials have ruled out the need for a large-scale lockdown yesterday, instead choosing to seal off specific structures and streets. Bankers and other office workers were instructed to work from home and to proceed with business as usual, fortunately and narrowly missing a huge blow that could’ve been dealt to China’s economy.

With Hong Kong and mainland Chinese markets notably improving in the last twenty-four hours and neighbouring political leaders responding positively to China’s pledges to stabilise market fluctuations, Asian sentiment has improved massively. Many investors are also now watching Southeast Asian economies such as Indonesia and Malaysia – major exporters of coal and rubber respectively – and looking for opportunities to benefit from rising commodity prices.

Related: Stock plunge makes China’s richest lose $53 billion in one day

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