(Bloomberg) — Chinese stocks have staged one of their most remarkable turnarounds in history, rising for a ninth straight day as government stimulus draws investors back to one of the world’s most beaten markets.
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The CSI 300 Index rose as much as 7.7% on Monday, its highest level since 2015, as traders rushed to buy shares in the final session before a weeklong holiday. The index, which lost more than 45% of its value from its 2021 high through mid-September, has since risen more than 20% – heading into a technical bull market. Last week’s rally was the biggest since 2008.
The further gains came after three of China’s biggest cities relaxed rules for homebuyers, while the central bank also moved to lower mortgage rates. The latest measures were among key elements of a sweeping stimulus package released on Tuesday that also included interest rate cuts, freeing up cash for banks and liquidity support for stocks.
Having faced several false insights in recent years, investors can rest assured that the current momentum can be sustainable. In a sign of continued frenzy, combined turnover on both the Shanghai and Shenzhen stock exchanges exceeded 1.6 trillion yuan ($228 billion) during the morning session, more than the total value of the shares that changed hands on Friday.
“The pace of the turnaround clearly reflects how oversold the market was,” said Charu Chanana, global market strategist at Saxo Markets. “There is a clear belief that this time it will be different in terms of the authorities’ support for the markets.”
Demand for Chinese stocks was so high on Monday that several local brokers experienced delays in processing orders on their trading applications, local media reported. Some securities firms also saw an increase in requests to open new trading accounts.
The latest trouble came after a burst of trading led to problems that overwhelmed the Shanghai stock exchange on Friday.
“Everyone was such a bear and now they’re all confused,” said Andy Maynard, head of equities at China Renaissance Securities HK Ltd. “Last week was the busiest time for China and Hong Kong that I have seen in a long time. ”
Brokers led the rally, with Citic Securities Co. reached the 10% daily upside limit, given the perception that they are the most direct beneficiaries of rising stock trades. Almost all CSI 300 parts inventories were in the green. A Bloomberg Intelligence gauge of Chinese property developers rose as much as 14%.
Renewed optimism about the world’s second-largest stock market is also spreading globally, with hedge funds selling U.S. technology stocks and piling into mining and materials companies. Meanwhile, iron ore prices rose nearly 11% as investors bet China’s efforts to ease real estate woes will improve demand from the world’s biggest consumer of the steelmaking ingredient.
The country’s 10-year government bonds fell on Monday, extending their biggest weekly decline in a decade, as investors focused on risky assets on expectations that a widespread stimulus wave would revive economic growth.
The Shanghai Composite Index’s Fear and Greed Indicator, which measures buying and selling momentum for the stock benchmark popular among Chinese retail investors, rose to its highest level since 2020 on Monday.
“I think the euphoric wave we saw in Chinese markets last week could turn into something more concrete and lasting, as there appears to be a complete policy change that could finally address the cyclical headwinds of the past three years,” says David Chao, a strategist at Invesco Asset Management. “While there may still be debate about how these policy shifts are being implemented and whether enough has been done, I think a new direction has been charted.”
–With help from Winnie Hsu and John Cheng.
(Updates with chart, price movements and new quotes)
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