Yuan Nears 34-Month High, Shanghai and Hong Kong Stocks Rise, Bond Yields Fall to 1.80%

Beijing | Global Markets

Chinese markets posted positive, synchronized performance on Tuesday, with gains in both currency and equities, while government bond yields saw a marked decline. This shift reflects improved sentiment and a gradual rebalancing of asset allocations in the world’s second-largest economy.

🇨🇳 Currency: Yuan Extends Gains

The offshore yuan rose to 6.9 per US dollar, reaching its strongest level in nearly 34 months, supported by rising domestic demand and notable regulatory shifts.

This move follows Chinese regulators' guidance for banks to reduce excessive exposure to US Treasuries, aiming to manage concentration risk and lessen the impact of US economic policy volatility. Seasonal demand ahead of the Lunar New Year also played a role, as companies and exporters converted dollars to yuan to cover payroll and obligations. It is estimated that over $1.13 trillion in funds have been awaiting conversion since 2022.

📈 Chinese Equities: Second Consecutive Session of Gains

Mainland stocks rose for a second straight session:

Technology stocks led the rally as concerns over rising AI spending eased after last week’s global sell-off. Companies like Hygon Information (+5%), GCL System Integration (+4.2%), and Cambricon (+2.4%) posted strong performances, along with gains in clean energy and resources.

Among corporate news, COL Group surged nearly 15%, buoyed by optimism in media and AI stocks following ByteDance’s launch of a new video generation model.

🌏 Hong Kong: Approaching Two-Week High

Hong Kong shares rose sharply, with the Hang Seng Index climbing 1.3% to 27,370 points, supported by a rebound in US tech stocks and the Dow Jones hitting a record high.

Broad-based gains were seen across technology and consumer sectors, with rises in:

• Pop Mart up 5.8%
• SMIC up 4.1%
• JD Health up 3.9%
• AIA Group up 3.4%

However, caution persists ahead of upcoming inflation and producer price data in China later this week and before the Lunar New Year holiday.

📉 Bonds: 10-Year Yields at 7-Week Low

Chinese 10-year government bond yields fell to 1.80%, the lowest level since December 2025.

• 4-week change: -6.3 basis points
• 12-month change: +18.8 basis points

This decline reflects increased demand for fixed-income instruments, alongside shifts in reserve management and risk balancing policies.

Analysis

The simultaneous moves in the yuan, equities, and bonds signal a gradual repositioning in Chinese markets, driven by domestic regulatory factors and improving risk appetite. Reduced reliance on the dollar and stronger local demand have buoyed the yuan, while equities benefit from easing AI-related concerns. Meanwhile, declining yields suggest continued indirect easing policies, supporting financial stability ahead of the long and sensitive holiday period.