Chinese A-shares soar as bull run sets in
▶ New investors tempted by prospects of economic revival
Chinese mainland shares rocketed on Monday, turning in the benchmark Shanghai Composite Index’s biggest one-day gain in five years, as a continued surge in securities stocks ignites investor confidence for the start of a bull run in the world’s second-largest economy.
The economy’s resilience despite the earlier COVID-19 assault also underpins hopes of a bull market, analysts said.
The Shanghai benchmark soared 5.71 percent to finish at 3,332.88 points, the highest since March 2018. About 95 percent of stocks traded on Chinese mainland bourses ended up. The Shenzhen Component Index rallied 4.09 percent while the tech-heavy ChiNext index gained 2.72 percent.
Securities shares led Monday’s
surge, despite statements by the nation’s two biggest brokerages – Citic Securities Co and CSC Financial Co – which refuted market rumors that they are in talks for a merger that intends to create an investment banking behemoth in China to take on their Western counterparts.
As of Monday’s close, the Shanghai stock index had shot up over 20 percent from its pandemic lows in late March, suggesting it has entered bullish territory in technical terms.
The announcement by China Securities Finance Corp Friday that expands the pool of funds available for margin financing loan services added fuel to confidence that a bull run is in the offing.
Semiconductor shares also held up as Hong Kong-listed chip-making major Semiconductor Manufacturing International Corp (SMIC) will return to the A-share market this month.
The rare frenzy in the Ashare market fed through to the Hong Kong stock market, with the Hang Seng Index rallying 3.81 percent, or nearly 1,000 points, to end at 26,339.16 points Monday, its highest in four months.
The latest rally is likely to continue on the grounds that the mainland market has not followed in the steps of its overseas counterparts that have rallied significantly in the past months, Lu Zhengwei, chief economist at Industrial Bank Co in Shanghai, told the Global Times on Monday.
Monetary policy easing by central banks the world over has facilitated an equity boom. Meanwhile, the positive effect of the monetary easing is evident, which added to an economic rebound, laid the groundwork for the current rally, Lu said.
The upswing will not be short-lived although fluctuations are inevitable, he said, noting that margin trading remains well under control and that a flurry of efforts has been taken to improve investor protection and enhance corporate governance of listed firms.
This would bode well for the broader economy, as businesses become more accessible to fundraising at lower costs, the economist stressed.
Trading volumes on mainland bourses hit nearly 1.6 trillion yuan ($227.44 billion) on Monday, the highest in five years. The total capitalization of China’s A-share market hit $10 trillion on Monday, the first time since June 2015 when the market was hit by a rout.
Ji Tianhe, the China head of foreign exchange and local markets strategy at BNP Paribas in Beijing, said there are chances of upward revisions to the full-year growth forecast.