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China stock market index has largest ever 1-day jump: Is crisis over?

China stock market index has largest ever 1-day jump: Is crisis over?

While the Chinese stock market – both mainland and Hong Kong – has been struggling for years, as it saw more than $6 trillion wiped since 2021, it fully grabbed international attention with the onset of 2024.

A string of attempted government interventions with lukewarm reception, a near-continuous downtrend across the board, a massive sell-off, and the bankruptcy of a major property developer all led to Monday, February 5, being one of the worst days for investors in the East Asian country.

Performance of CSI 1,000, CSI 300, and HSI at the close on February 5. Source: Google

By Tuesday, February 6, things took a sharp turn. 

The most recent announcement on government efforts to stabilize the market – including promises to crack down on malicious short selling and insider trading – a rescue injection worth hundreds of billions of dollars, and the news that Chinese president Xi Jinping will be briefed on the dire matter all appear to have finally investors.

In fact, at press time, the CSI 1,000 – one of the most important benchmarks for mainland markets – just ended its strongest trading sessions as it rose a total of 6.97% in 24 hours.

convinced 

CSI 1,000 1-day price chart. Source: Google

Two additional important indices – the blue-chip-tracking CSI 300 and Hong Kong’s HSI – also saw significant gains in Tuesday’s trading session, having surged 3.49% and 4.04%, respectively.

CSI 300 and HSI 1-day price charts. Source: Google

Prominent trader bullish on Chinese tech stocks

Spearheading the bull case for Chinese stocks – and particularly the Chinese technology giant Alibaba (NYSE: BABA, HKG: 9988) – on the popular social media platform X is the prominent event-driven trader Gurgavin Chandoke. 

He has not only publicly stated the increases to his BABA holdings – most recently in late January – but has also expressed his disbelief that investors and traders are still trying to short Chinese technology stocks despite the government ‘literally trying every single thing it can to pump the market.’

Alibaba stock has definitely caught up with the most recent trend observable in China – at least in the Hong Kong market. In the last 24 hours, the stock is up 7.57% to 76 HKD in the last 24 hours. 

Alibaba 1-day Hong Kong price chart. Source: Google

The tech stock has also been doing well on the New York Stock Exchange as it rose 3.91% on Monday, the latest full trading session at press time, and is up another 2.51% in Tuesday’s pre-market. Additionally, it is up 8.70% since Chandoke’s latest purchase update at $68.66 on January 23, 2024.

Alibaba New York YTD price chart. Source: Finbold

Are Chinese investors out of the woods?

While the developments observed on February 6 stand in stark contrast to the downtrend that arguably peaked only a day earlier, it remains to be seen whether the crisis has been averted. 

The Chinese markets similarly surged in late January when it was revealed that Beijing is considering a $300 billion rescue injection only to erase all gains before the end of the first week of February. In fact, the crisis is, in some aspects, so deep that the Hong Kong market in 2024 reverted to the level it was when the British left in 1997.

Finally, the Chinese market also has to contend with the rising Indian market, which has not only taken a significant portion of global manufacturing in recent years but also an increasingly large part of international investments.

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