Samuel Shen and Kevin Buckland

SHANGHAI/TOKYO – China’s financial chief has rescued the stock market from a crisis this week, promising stability. But many investors believe that mere words won’t bring about lasting peace in an economic environment plagued by large risks.

After Vice Premier Liu He’s promises on stability, regulatory clarity, and monetary ease, Hong Kong markets, who have been the victims of the massive sell-off in Chinese stocks has rallied strongly.

Investors are more worried about a negative impact on China as a result of its sanctions-hit Russia deals. They also worry about a rise in COVID-19 cases within China that could threaten economic activity.

Chairman of Harvest Capital in China, Alan Song said that the stock rally was likened to drowning investors grasping for straws. He expects the recovery will be temporary because the fundamental causes remain.

Song said that “Hoping that the speech will change market trends is like expecting the WeChat message to change all of humanity,” Song was referring specifically to an app for social messaging in China.

He said that China must resolve Sino-American antagonism in earnest and strengthen its anti-virus strategy. “Trillions of market value have been wiped off” and it is important to reflect on the implications.

The stock market jumped from its 2008 bottoms after Liu’s speech and saw a huge 2-day rally. China’s crackdown on regulation has led to stocks in a number of industries, including technology, that have rebounded.

This year’s stock market decline had wiped off $1.3 trillion, or 17%, of China’s main CSI300 index value between January and Tuesday. China’s stock market continues to be the second worst performer in the world, following Russia, even after this rally.

Sat Duhra is a portfolio manager for Janus Henderson Investors and points out that even though the rally was narrow within Chinese markets, this shows the inconsistency of investors’ conviction.

Stocks such as Taiwan Semiconductor Manufacturing Company or Australian miners were also not buoyed by the bounce in China. These stocks are closely linked to China.

“I certainly wouldn’t be brave enough to be adding to China today,” Duhra said on Wednesday.

Duhra said he feels a shift in sentiment towards China. This is not only due to concerns about China’s close relationship with Russia, but also because of a host a problems like power outages and property sector woes. Also, Duhra believes that China has an ambition for growth.

He stated, “There’s lots of things that can be put together and said this doesn’t seem very good.” They are still there.

SHOW and TELL

Morgan Stanley Analysts at the NYSE noted that many ministries took action following Liu’s address to a meeting the Financial Stability and Development Committee. This is a regulator under China’s State Council.

According to state-owned Xinhua, the financial ministry had placed a hold on plans for a trial tax on property this year.

China’s securities regulator announced that they would work together with U.S counterparts in order to facilitate the inspection of Chinese businesses. JD shares are now listed on the U.S. stock exchange (NASDAQ:).com Alibaba (NYSE: ) They posted their highest daily percentage gains because they were less likely to be delisted from New York Exchanges.

Yin Peixin from RBH Asset Management Shanghai said that despite the temporary boost in market sentiment Liu’s comments will not change the course or the worsening situation of coronavirus in China.

I think decoupling between the U.S. and Sino is inevitable. “It’s only a matterof time,” Yin said.

He said that the Ukraine crisis had forced companies to choose sides and deepened geopolitical tensions. And rhetoric would not stop the spreadof the coronavirus.

Yuwei, who is also a manager for Water Wisdom Asset Management’s hedge fund, stated that the rebound would not reverse global investors leaving China stocks to escape rising sanctions.

Yuan stated that China was being pressured to choose sides in Ukraine’s conflict. Yuan still has short-term positions in Chinese tech companies like Meituan/Li Auto.

For a global investor, ”if you own a lot of China holdings, of course you’re worried, as China and Russia are both seen as rivals by the U.S.,” and the fear is deepened by what you’ve seen happen to Russian assets, he said.