China stocks jump most in 7 months as US midterm results trigger rebound 

By Reuters News

- China's share benchmark jumped more than 2% in its best day in seven months on Wednesday, as the US midterm results gave Chinese investors an excuse to buy battered shares in an afternoon rally also underpinned by fresh government support.

** The Chinese market was flat in the morning but rallied after lunch on news that Democrats seized control of both the US Senate and House, a development some interpreted as good news for stocks and gold.

** The benchmark Shanghai Composite Index .SSEC surged 2.2%, its best single-day rise since early April.

** The blue-chip CSI300 Index .CSI300 shot up 2.3%, its best showing in three months.

** Hong Kong's Hang Seng index .HSI gained 1.7%, with chipmakers .HSIT and biotech stocks .HSIDI leading the gains.

** Analysts said the sweeping victory fuelled expectations of US monetary easing, pointing to public discontent over inflation being one of the main reasons for the Republicans' loss.

** The win is likely to bring down inflation and rate hike expectations, said Yang Tingwu, fund manager at Tongheng Investment.

** This would "benefit gold and lower financing costs for technology stocks," said Wen Xunneng, CEO of Zhu Liu Asset Management, adding the news offered a catalyst for buying in a market that "had fallen too much and for too long."

** Tech stocks, which had been the target of savage selloffs over the past months, shot up. Shanghai's tech-focused STAR Market .STAR50 surged 10%, while Shenzhen's startup board ChiNext .CNT jumped 6.4%.

** China's AI-related stocks .CSI950125.STAR100 also rose sharply, taking cues from an overnight rebound in US chip shares.

** The election win could also lead to a tightening of AI regulations and slow down data centre build-out, but such worries had been priced in, Bosera Fund Management Co said in a note.

** "The removal of (election) uncertainty has prompted the rebound," Bosera said, but it cautioned that Wednesday's rebound could be technical, rather than a trend reversal.

** The market also drew support from the central bank's announcement that banks have applied to borrow more than 200 billion yuan ($29.98 billion) to fund listed firms' share purchases under an upgraded re-lending scheme.

** The announcement came a day after the People's Bank of China conducted swaps worth 100 billion yuan with brokers and fund companies to finance their share buying.

** The scheme is part of measures Beijing announced late on Monday to stem a slide in a market that is among the world's worst-performing this year.

** The CSI300 slumped 8.5% in October, its worst month since early 2016, as China's economic weakness and a tumble in tech shares hit confidence.

($1 = 6.6701 Chinese yuan renminbi)

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