(Bloomberg) -- Chinese shares started Monday with strong gains after a week-long holiday, tracking an earlier jump in Hong-Kong listed names and as concerns eased about regulatory headwinds for the nation’s battered tech sector.
The CSI 300 Index, which fell into a bear market just before the Lunar New Year holidays, rallied as much as 2.4% in early trading. The Shanghai Composite Index also rose. In Hong Kong, the Hang Seng China Enterprises Index edged up 0.2% after adding nearly 3% on Friday in its first session post the break.
Chinese stocks had their worst January performance in years as worries about a weak economy and the property sector’s debt woes outweighed Beijing’s monetary easing. While global equities advanced when China was shut, stocks on the mainland may struggle to keep up with any initial upward momentum given their weakening correlation with offshore markets, unless policymakers take more steps to restore investor confidence.
China markets can “catch up to the moves over the past week in offshore China equities,” said Marvin Chen, a strategist at Bloomberg Intelligence. “Markets will be looking for more easing post Lunar New Year to support liquidity.”
How China’s central bank will manage liquidity after its customary pre-holiday pump priming will also offer clues. The monetary policy divergence between Beijing and Washington -- touted as one key reason for global brokerages to turn bullish on Chinese equities -- hasn’t yet led to any meaningful gains, with last month’s cut to a key interest rate failing to excite local traders.
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State media reports have again come into play, seeking to rally investor morale after concerted efforts with the securities regulator and mutual funds failed before the holidays. The China Securities Journal said the A-share market is well supported in the medium and long term as investor worries about the economy and policies are expected to ease, while the Shanghai Securities News saw a rally in overseas markets as supportive for local equities.
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