Hang Seng Index Rebounds as China Moves to Reassure Investors It Will Allow US IPOs

July 29, 2021 6:17 AM EDT
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After heavy selloffs that occurred on Monday and Tuesday, Chinese stocks have rebounded on reassurance from state regulators that China will allow local companies to still conduct initial public offerings (IPO) overseas.

Hang Seng Index closed 3.3% higher on the day, led by the major tech stocks. Tencent (OTC: TCEHY) closed the day 10% higher, Alibaba (NYSE: BABA) gained 7.7% while Meituan (OTC: MPNGY) added 9.5% after falling over 17% in a single day earlier this week.

The rebound came after China moved to reassure global banks and investors that it will still allow US IPOs. The country’s leading party previously made moves to heavily punish Didi Global (NASDAQ: DIDI) for going public in the US and staying away from Hong Kong.

“[China Securities Regulatory Commission] CSRC is open to companies choosing where to list and supports companies in making choices based on their own development needs,” it is said in the statement.

The Wall Street Journal reports that China told leading banks and private financial firms that it plans to consider the market impact before introducing future policies. Goldman Sachs and UBS were some of the banks that participated in the closed-door meeting.

“It is difficult to reverse the way that some Chinese government agencies implement policies in the short term. Many departments these days prefer to take nationalistic policies than liberal ones, to an extent that could undermine the capital markets. This is very dangerous,” said Liu Zhiqin, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China.

The closed-door meeting in Beijing came a day after Vice Premier Liu He told small business owners that the country is trying to balance development and security.

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