Chinese stocks enter bull market as economy stabilises

CHINA’S benchmark index entered a bull market on Friday as the economy showed signs of stabilisation and the rollout of property curbs boosted the lure of equities.

The Shanghai Composite Index climbed 0.8pc to close at 3,196.04, taking its advance from its January 28 low to more than 20pc.

Gains this quarter have been led by commodity producers and construction companies as the government boosts spending to bolster growth and the price of everything from coal to copper surges. The benchmark gauge has rallied more than 6pc since the end of September as cities including Shanghai unveiled curbs to cool the housing market, while margin debt is also rising.

“Liquidity is abundant and property curbs will prompt more money to flow into stocks, which look undervalued relative to homes in large cities,” said Li Jingyuan, general manager at Shanghai Bingsheng Asset Management. The benchmark gauge “may go as high as 3,900”, Li said.

The Shanghai Composite has climbed for the past five weeks in a row, the best run of gains since May 2015. While stocks have been rising, the yuan has tumbled to a six-year low and the 10-year yield on sovereign debt climbed to the highest level since July. Moves accelerated this week as Donald Trump’s unexpected victory boosted the dollar amid speculation his policies will be inflationary, prompting the Federal Reserve to be more aggressive in raising interest rates.

In China, policy makers have increased fiscal stimulus as tepid global demand and slowing private investment weigh on the economy, with growth on track to meet the leadership’s target of at least 6.5pc this year.