CHINESE stocks leapt to their largest one-day gain in two years yesterday and the yuan rose on a slew of signals that authorities are strengthening their resolve to support slumping markets.

The Shanghai Composite jumped 3.2%, its biggest daily gain since March 2022. Trade volume was the highest since May last year.

The blue-chip CSI 300 climbed 3.5% for its largest one-day rise since Nov. 2022, and the small cap index notched its biggest rise since 2008.

The rebound comes after country’s main indexes sank to five-year lows in recent sessions.

Stocks started the day higher as Central Huijin Investment Ltd., the unit that holds government stakes in big financial institutions, said it will continue to increase holdings of exchange-traded funds.

That was soon followed by the securities regulator pledging to make greater efforts in guiding long-term funds to enter the market.

Most of the surge happened when traders returned from markets’ midday break having digested a volley of helpful headlines.

“Huijin’s announcement will guide and encourage more funds to buy and also confirms the market speculation on more state buying recently,” said Zhou Nan, investment director at Long Hui Fund Management.

“There’s very limited room for further slide but the market may continue to fluctuate before the bottom can be solidified.”

Foreigners’ net buying at 12.6 billion yuan (US$1.75 billion) is the largest one-day rush of the year so far.

In Hong Kong, the Hang Seng rose 4% for its biggest gain in six months and beaten-down market darlings led the way, with the Hang Seng tech index up 6.8% in its biggest rise in more than a year.

Online giants and Alibaba and JD.com were among the top performers with gains larger than 7.5%. Developer Longfor rose 10% as did Country Garden’s property services division.

The yuan, which has been underpinned by firmer-than-expected central bank guidance in recent days, was also on the rise, lifting from Monday’s three-week low to 7.1865 per U.S. dollar.

But some analysts said all that seemed to be supporting the market bounce was buying by State-backed investors dubbed the “national team,” not a sudden reversal of investor sentiment, with few signs policymakers would act soon to address structural economic problems such as weak demand and deflationary pressures.

“I would say these kind of measures were needed to support the investors’ sentiment, so the initial reactions were all positive,” said SMBC economist Ryota Abe.

“However, the economic fundamentals remain unchanged. As long as markets have fundamental concerns on the real economy, the slew of announcements will remain effective only in the short term.”

(SD-Agencies)