(Bloomberg) — Chinese stocks extended one of the most remarkable turnarounds in history, rising for a ninth straight day as government stimulus spurred investors back into one of the world’s most battered markets.
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The CSI 300 index rose as much as 7.7% on Monday, its most since 2015, as traders rushed to buy stocks in the last session before a weeklong holiday. The index, which lost more than 45% of its value from its 2021 high through mid-September, has since rallied more than 20% — heading into a technical bull market. Its rally last week was the biggest since 2008.
The extended gains came after China’s three biggest cities eased rules for homebuyers, while the central bank also moved to cut mortgage rates. The latest measures are among key elements of a larger stimulus package unveiled on Tuesday that includes interest rate cuts, freeing up cash for banks and liquidity support for stocks.
Having faced several false dawns in recent years, investors are betting that the current momentum may be sustainable. In a sign of continued frenzy, combined turnover in both Shanghai and Shenzhen stocks exceeded 1.6 trillion yuan ($228 billion) in the morning session, more than the total value of stocks that changed hands on Friday.
“The speed of the reversal clearly reflects how oversold the market is,” said Saru Sanana, global market strategist at Saxo Markets. “There is a clear belief that this time is different in terms of the authorities’ support for the markets.”
Demand for Chinese stocks was so strong on Monday that many local brokerages experienced delays in processing orders on their trading applications, local media reported, while some securities firms also saw a surge in requests to open new trading accounts.
The latest hiccups came after a flurry of trading led to rout that engulfed the Shanghai stock market on Friday.
“Everybody’s been such a bear and now they’re all chasing,” said Andy Maynard, head of equities at China Renaissance Securities HK Ltd. “
CITIC SECURITIES CO. Brokerages led the rally by hitting the 10% daily upside limit, with the view that they were the direct beneficiaries of the rising stock trades. Almost all CSI 300’s parts were green. Bloomberg Research benchmarks Chinese property developers up 14%.
Renewed optimism about the world’s second-largest stock market is spreading globally, with hedge funds selling U.S. tech stocks and piling into mining and materials companies. Meanwhile, iron ore rose nearly 11% as investors bet that China’s efforts to ease asset woes would improve demand from the world’s top consumer of the steel-making raw material.
The nation’s 10-year sovereign bonds fell on Monday, extending their biggest weekly drop in a decade, as investors flocked to riskier assets on expectations that a widespread stimulus blitz would revive economic growth.
The Shanghai Composite Index, which measures buying and selling momentum for a stock benchmark popular among retail investors in China, rose to its highest level since 2020 on Monday, reflecting fear and greed.
“I think the euphoric upswing we saw in Chinese markets last week could turn into something more solid and sustainable as there appears to be a complete policy shift that could finally resolve the cyclical interventions of the last 3 years,” said David Chau. Strategist at Invesco Asset Management. “While there may still be debate about how these policy changes are being implemented and whether they have been done enough, I think a new direction has been charted.”
–With assistance from Winnie Hsu and John Cheng.
(Updates with chart, price movements and new quotes)
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2024-09-30 11:04:11