Tiyashi Datta and Danilo Masoni

(Reuters) – Chinese shares listed abroad rallied Wednesday following Beijing’s promise to maintain stability in markets, relieving investors worried about a decline caused by worries about differences between China and Western countries over the Russia-Ukraine conflict.

China’s Vice-Premier Liu He made remarks that Beijing would support the economy and maintain stability. This triggered a rebound from local equities’ 21-month lows. It also fueled a rally in U.S. and European-listed Chinese shares.

JD, (NASDAQ:).com Alibaba (NYSE: Pinduoduo (NASDAQ:) Their shares jumped between 20% – 31% in U.S. Premarket Trading, following Tuesday’s collapse that saw them all fall to multiple-year lows.

NetEase, a gaming company, was able to make similar gains. NASDAQ:: IQIYI and Tencent Music were also impacted by the outsized move. Prosus, an Amsterdam-listed stock exchange, had a 29% stake, but gained 20%.

Mohammed Apabhai (Citibank Asia-Pacific Trading Strategist in Hong Kong), compared the moment to either the Federal Reserve’s Market Backstop in 2020, or the speech of then-ECB Chief Mario Draghi, which halted the crisis in the eurozone in 2012.

“It’s certainly not of this order of magnitude,” he stated.

It was not what the market expected. Now it appears that China is realizing the importance of doing something right to boost the economy.

These gains are also indicative of investors seeking bargains following severe selling pressure in Chinese equities. Stocks in Hong Kong fell to their lowest level for six years on Tuesday.

Giuseppe Sersale from Anthilia, Milan, said that while China is still volatile and opaque, this time is the best moment to examine Chinese stocks. “Valuations are high and macro data are improving,” he added.

Frankfurt-listed depository receipts for Alibaba were among the most traded stocks on the Tradegate and Lang & Schwarz platforms, suggesting interest from German retail investors.

Vanda Research (NASDAQ 🙂 Research tracks retail flows and reports that China ADR appetite is at its highest since September 2021. The net sales of the past 10 trading sessions have topped $500 billion. It’s the highest total in 6 months.

Separately, China’s Securities Regulator stated that it will continue communication with U.S. regulators in an effort to achieve an agreement regarding China-U.S. supervision cooperation.

According to Russ Mould, London’s investment director at AJ Bell, the rapid response Beijing gave to the selloff this week suggests that it doesn’t want things to get out of control.

He stated that the key objective of stock markets is to promote common prosperity. Many Chinese retail investors own equities so it is important for them to have their money. If shares fall in value, they are at risk.

Chinese stocks could be a long-term good investment. This is after a 2021 that has been turbulent due to the crisis in real estate and strict regulatory enforcement against tech giants.

Current MSCI China Index trades at an average valuation discount of 36% to world stock prices, which is double the discount for 20 years, according Refinitiv Data.

Graphic: China stocks discount: https://fingfx.thomsonreuters.com/gfx/mkt/egpbkqdryvq/China%20discount.PNG