Chinese and Hong Kong shares tick higher after Beijing pledges market stabilisation

what happened

Mainland Chinese and Hong Kong stocks edged higher on Monday, following regional peers, while Beijing called for more effort to stabilise the market, Reuters reported. At the midday break the Shanghai Composite gained 0.5%, the CSI300 added 0.3%, the Shenzhen index rose 0.4%, the ChiNext climbed 0.6% and the STAR50 advanced 0.7%. In Hong Kong the Hang Seng inched up 0.2%, and technology shares gained 0.1%.

The move came after the State Council pledged on Friday to improve mechanisms for stabilising the capital market, according to state broadcaster CCTV. Analysts at Societe Generale said weak economic data and equity performance had crossed policymakers' tolerance threshold, which is prompting fresh support measures. They warned, however, that sustained gains would require stronger corporate profits and a revival in domestic demand. Separately, China's producer prices rose in October at the fastest pace in nearly four and a half years, driven by higher global oil prices, while consumer inflation cooled.

why it matters

Support measures can steady investor sentiment, but lasting gains depend on corporate earnings and domestic demand. Regional markets had just endured a sharp sell-off over doubts about chip demand, so the rebound is partly a recovery from a volatile week.

market impact

China and Hong Kong stocks: state support steadies sentiment and gives indexes modest upside.

• ▲Shanghai Composite pressure up — the State Council's pledge to support the market lifts investor sentiment
• ▲Hang Seng pressure up — regional gains and the stabilisation pledge support Hong Kong stocks

instruments