China Stocks in US Jump on Report Audit Inspection Deal Is Near

(Bloomberg) — China stocks listed in the US surged by the most in two weeks after the Wall Street Journal reported that regulators in Washington and Beijing are nearing an agreement that would move them one step closer to resolving a long-standing disagreement over auditing practices.

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Shares of US-listed tech giants including Alibaba Group Holding Ltd., JD.com Inc. and Pinduoduo Inc. all rose at least 7.5% Thursday. Meanwhile, NetEase gained 4.1%, while electric-vehicle makers Nio Inc. and Li Auto Inc. added 6.3% and 5.3% respectively. The Nasdaq Golden Dragon China Index jumped as much as 6.1%, bringing its four-day rally to more than 10%.

The report says the agreement would allow representatives from the US Public Company Accounting Oversight Board to travel to Hong Kong as soon as next month to perform audits on record for Chinese companies listed on America exchanges.

“This is a fascinating development,” said Edward Moya, senior market analyst at Oanda Corp. “An official confirmation is needed but expectations were growing that this would get done as both countries are dealing with economic fragility,” he added.

Read more: US, China Near Deal on China Co’s Audit Inspections in HK: DJ

Such a move would be a major step toward alleviating fears of mass forced delisting of US-listed Chinese stocks, something that has weighed on shares for more than a year. Earlier this month, China Life Insurance Co., PetroChina Co. and China Petroleum & Chemical Corp. were among a group of state-owned companies that announced plans to delistfrom American exchanges.

The rally in US trading follows what was the best day in nearly four months for Hong Kong’s Hang Seng Tech Index, which rose 6% on Thursday. That helped lead the city’s benchmark Hang Seng Index to a 3.6% gain, making it the best performer among Asia’s major equity gauges.

In addition to the Chinese government’s 1 trillion yuan ($146 billion) of support for the economy, traders cited short covering and an adjustment of positions ahead of Jackson Hole.

Stocks in Hong Kong had slumped to the lowest in months this week, as global risk-off sentiment spread ahead of the Federal Reserve’s Jackson Hole symposium. Concerns over China’s economic growth, with a deepening property crisis and power shortages spurred by a severe drought, had added to the gloom.

Following three days of losses, the Hang Seng Index was also looking ripe for a rebound to some market watchers based on various technical indicators.

The gauge was near “oversold” levels on monthly measures of the relative strength index, approaching the 30-threshold that’s never been reached in data going back to 1972. Morgan Stanley strategist Gilbert Wong said “the risk of short squeeze in China and Hong Kong equities is rising.”

(Adds details on WSJ report, updates pricing throughout.)