Scottish Mortgage Investment Trust PLC (LSE:SMT) shares rebounded sharply on Wednesday after Chinese authorities stepped in with a pledge to support markets.
The FTSE 100-listed fund, which has Tencent, Meituan and Alibaba among its top 10 shareholdings, jumped over 7% to 941.59p, rebounding from its recent 18-month lows.
Tencent and Alibaba were among the biggest risers this morning following Beijing's moves, up over 20% apeice, with Hong Kong's Hang Seng index up more than 9% and the Shanghai Composite up 3.5%.
Alongside Scottish Mortgage in London, other big blue-chip risers in London were Prudential PLC (LSE:PRU) and Standard Chartered PLC (LSE:STAN), both up around 5%, while China-focused investment trusts were also well bid, with Fidelity China Special Situations PLC leaping 10.4% and Baillie Gifford China Growth Trust PLC up over 11% and JPMorgan China Growth & Income PLC up more than 12%.
In the preceding two days, Chinese stocks and those linked to the region had tumbled after the city Shenzhen was one of several important regions put into lockdown as the government reacted to rising Covid cases and attempts to maintain its "zero-Covid" policy.
These lockdowns have raised fears that the domestic economy will suffer and cause further problems for global supply chains, among other issues.
Coming on top of existing regulatory pressures from Beijing for tech companies and a clamp-down on US listings from authorities in both countries, this resulted in more than US$460bn being wiped from China’s tech sector so far this year.
“Now Beijing has vowed to introduce policies that benefit markets although the big unknown is still whether the country will side with Russia," said analysts at AJ Bell.
They added: “The speed at which Beijing has responded to this week’s sell-off would suggest it doesn’t want to let things drift out of control. Its key goal is common prosperity and stock markets matter because a lot of Chinese retail investors have money in equities, so their wealth is at stake if shares are plummeting in value."
But Paul Donovan, chief economist at UBS Global Wealth Management, said: "Markets have been a mess in recent days, with the focus on spin not substance. Chinese lockdowns today are nothing like those of two years ago, but markets struggled to get past the word 'lockdown'. Now the Chinese government is pledging 'support', and so 'support' is the only word that matters."
What's more, fellow UBS economist Arend Kapteyn believes more restrictions are likely given how fast Omicron is spreading.
"We expect that to dampen China's consumption, in particular (travel, restaurants, services), likely also slowing the labour market recovery.
"How much supply chain disruption this creates is unclear -- China has been very effective in creating 'bubbles' around factories and manufacturing hubs, but this is its highest 7-day rolling case count since the start of the pandemic, and a number of large manufacturers have already reported production suspensions."
China's move comes just as the rest of Asia has been moving away from zero-Covid policies, which Kapteyn believes have been the "single largest contributor" to the improvement in supply chain stress recently.
"Note that China's level of restrictiveness is, at this stage, roughly in line with the rest of Asia, which had come down to China's level," he added.