Prosus, Standard Chartered rally on mood shift in China

By Geoffrey Smith 

Investing.com -- Shares in Prosus (OTC:PROSF) and Standard Chartered (OTC:SCBFF) stood out in early trading in Europe on Wednesday, both rising in sympathy with a rally in Chinese stocks after signs that the business climate is changing for the better there.

Prosus (AS:PRX), the Dutch-listed holding company that controls a stake of around 30% in Chinese tech giant Tencent (HK:0700), rose 3.4% to an 11-month high, while Standard Chartered PLC (LON:STAN) - whose biggest market is China - rose 1.8% to its highest in over two years.

For Prosus, the trigger was the news that Ant Group, a financial services company whose landmark IPO was blocked by Chinese regulators in 2019, has now been given permission to raise capital. The fight between Ant Group - an affiliate of Jack Ma's Alibaba (NYSE:BABA) - and regulators was arguably the defining episode in a three-year battle between technology companies and the Chinese Communist Party, which feared that their growing economic clout posed a risk to its political control of the country.

Standard Chartered, meanwhile, was lifted by a report suggesting that the Chinese government is preparing a new round of measures to support the ailing real estate sector. Bloomberg reported overnight that the Financial Stability and Development Committee told banking and securities regulators late last week to help restore the balance sheets of some "systemically important" developers.

The move appeared aimed at creating a clearer distinction between those companies that are still viable and those that are likely to collapse under the weight of their debts. The lack of effective resolution mechanisms to clean up a sector that accounts for the largest part of Chinese fixed investment has been a major drag on the economy for the last two years.

Local Chinese markets had reacted strongly to the news, Hong Kong, in particular, extending a rally from levels that were historically oversold toward the end of last year. The Hang Seng index finished up 3.1% at a six-month high, while mainland indices posted more modest gains. The offshore yuan strengthened another 0.5% to 6.88 to the dollar and is now up nearly 2% so far this year.