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A happy accident from the PBOC sent Chinese stocks soaring

A worker walks between two bullet trains at a high speed railway maintenance station in China's, Shaanxi province.
Reuters/Stringer
The promise of a new “through train” got investors riled up.
This article is more than 2 years old.

Chinese stocks had a huge 4.3% rally Wednesday (Nov. 4) because of a slip-up by the People’s Bank of China.

The central bank published comments by PBOC governor Zhou Xiaochuan on financial reform that mentioned China is working on a link between stock exchanges in Shenzhen and Hong Kong without indicating they came from a months-old speech (link in Chinese). The move would make it even easier for foreign money to flow into China’s financial system.

As a Bloomberg article on the remarks notes, investors stopped putting a lot of stock in the idea that China was still trying to emphasize its equity markets after they crashed this summer. The comments, included in a lengthy article, sent the SSE Composite index to its highest point since a tumultuous August that left stocks negative for the year.

The first so-called “through train” opened in China linked Hong Kong and Shanghai late last year, and it proved a boon to stocks in its first week back when those markets were still red-hot. But more important to China is creating the appearance of an open market that might help the yuan win status as a global reserve currency. The redback appears to be on the verge of inclusion in the International Monetary Fund’s basket of special drawing rights currencies—alongside the US dollar, the British pound, the euro, and the Japanese yen—and a new through train could be a factor in that decision when the IMF meets later this month. But today’s events don’t leave much clarity on where that stands.

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