Chinese markets soared and the yuan rose on Friday, with about a trillion dollars added to the value of Chinese stocks in week, as rumours and news reports fed hopes for twin relief in U.S.-China tension and China's tough COVID rules.
The Hang Seng .HSI surged 5.3% and notched its biggest weekly gain in 11 years. The Shanghai Composite .SSEC rose 2.4% for a 5.3% weekly gain, the largest in more than two years and China-sensitive assets around the world rose sharply.
Bloomberg News reported initial U.S. inspections of audit papers at U.S.-listed Chinese companies - a long-running point of regulatory tension and risk - finished ahead of time, raising hopes that the U.S. officials were satisfied.
"The optimism right now is basically a removal of certain types of uncertainties that have been lingering ... but the outlook is really mixed," said Peiqian Liu, China economist at NatWest Markets in Singapore.
Gains were broad, defying a downbeat mood in global markets weighed by the prospect of U.S. interest rates rising further than previously expected. Property and tech shares led the way.
Shares in online giants Alibaba 9988.HK and JD.com 9618.HK each rose more than 10% and the Hang Seng Tech index .HSTECH rose 7.5%. Property manager Country Garden Services 6098.HK rose 15% and an index of mainland developers .HSMPI rose 9%.
Technical factors, following months and months of relentless selling also helped the rebound, said Kenny Ng, a strategist at China Everbright Securities in Hong Kong.
Gains in value, across Hong Kong, Shenzhen and Shanghai over the week are approximately $1 trillion. However the Hang Seng remains down 30% this year against a 24% fall in world stocks .MIWD00000PUS. The Shanghai Composite is down 15% this year.
The rally extended to commodities markets with iron ore futures surging on Friday, and China-sensitive stocks listed in London and Europe.
Miners such Rio Tinto RIO.L and Anglo American AAL.L rose sharply along with luxury retails like LVMH LVMH.PA and Swiss jeweller Richemont CFR.S.
Changes to COVID policies have not been officially flagged. A foreign ministry spokesman said on Tuesday he was not aware of the situation, when asked about rumours on social media that China was planning a reopening from strict COVID curbs in March.
Bloomberg News also reported on Friday, citing unnamed people familiar with the matter, that China was working towards relaxing rules that penalise airlines for carrying COVID-positive passengers.
A foreign ministry spokesman later said he was and that China's COVID policies were consistent and clear.
"I do not see anything new that has changed the Hong Kong and China investment environment," said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong.
"The only explanation I have is that the sell-off has been excessive post-Congress, valuation on some offshore names has been very distressed, and there is some bottom-fishing."
The currency joined in the rally, jumping more than 0.5% to touch a one-week high of 7.2340 per dollar.
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