China Stocks Rebound From Sell-off That Erased $720 Billion

China’s stock benchmark recouped all its losses from arecord $720 billion sell-off earlier this month, a sign that investor confidence is improving after policy makers acted to ease the economic fallout from the coronavirus outbreak.

The CSI 300 Index added as much as 0.9% Monday, surpassing its 4,003.9-point close from Jan. 23, the last trading day before a Lunar New Year break that saw a surge in virus infections. The index plunged 7.9% on Feb. 3 as Chinese marketsreopened to a health crisis that paralyzed most of the world’s second-largest economy. The measure remains well below its high close for the year of 4,203.99 reached on Jan. 13.

To cushion the blow, China’s government has pumped cash into the financial system,trimmed money-market rates and offered targeted tax cuts. Beijing will also allow local governments to sellanother 848 billion yuan ($121 billion) of debt before March, as authorities seek to offset the economic shock of the coronavirus. China said Sunday it will enact more-efficient stimulus measures despite a widening fiscal gap, including lower corporate taxes.

“More stimulus policies are highly expected and an excess of capital that cannot be immediately absorbed by the real economy is expected to flow into the equity market, further lifting risk appetite,” said Yang Wei, a fund manager at Longwin Investment Management Co.

While the full scope of the epidemic and its economic impact remain unclear, some investors are starting to look past worst-case scenarios.

The smaller-cap ChiNext Indexreversed its post-holiday slide in just over a day and has continued to power higher from there. It topped the 2,100-point level Friday for the first time since December 2016.

The stocks regulator said Friday that it would ease some rules for firms seeking to raise extra capital through share placements, including shortening lockup periods. The rules would benefit small caps, helping the ChiNext add 2% on Monday.

— With assistance by April Ma, and Michael Patterson

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