Chinese Stocks Soar Most Since 2015, Heading for Bull Market

(Bloomberg) — Chinese stocks extended one of their most remarkable turnarounds in history, soaring for a ninth straight day as government stimulus entices investors back to one of the most beaten-down markets worldwide.

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The CSI 300 Index jumped as much as 9.1% on Monday, the most since 2008, as traders rushed to buy shares in the last session before a week-long holiday. The index, which lost more than 45% of its value from a 2021 high through mid-September, has since soared more than 20% — heading for a technical bull market. Its rally last week was the biggest since 2008.

The extended gains came after three of China’s largest cities relaxed rules for homebuyers, while the central bank also moved to lower mortgage rates. The latest measures were among the key elements of a sweeping stimulus package released Tuesday that also included interest rate cuts, freeing-up of cash for banks, as well as liquidity support for stocks.

Having faced several false dawns in recent years, investors may be betting that the current momentum may be sustainable. In a sign of continued frenzy, combined turnover on both the Shanghai and Shenzhen bourses exceeded 2.4 trillion yuan ($340 billion) so far on Monday, exceeding the total value of shares that changed hands Friday.

“The pace of the turnaround is clearly reflective of how oversold the market was,” said Charu Chanana, global markets strategist at Saxo Markets. “There is a clear belief that this time is different when it comes to authorities’ support for the markets.”

Demand for Chinese stocks was so strong on Monday that several local brokerages experienced delays in processing orders on their trading applications, local media reported, with some securities firms also seeing a surge in requests to open new trading accounts.

The latest hiccups came after a burst of trading led to glitches that overwhelmed the Shanghai stock exchange on Friday.

“Everyone has been such a bear and now they are all scrambling,” said Andy Maynard, head of equities at China Renaissance Securities HK Ltd. “Last week was the busiest times for China and Hong Kong I’ve seen in a long while.”

Brokerages led the rally, with Citic Securities Co. hitting the 10% daily upside limit, given the perception that they are the most direct beneficiaries of rising stock transactions. Almost all of CSI 300’s component stocks were in the green. A Bloomberg Intelligence gauge of Chinese property developers jumped as much as 15.7%.

Renewed optimism about the world’s second-largest stock market is also spreading globally, with hedge funds selling US technology stocks and piling into mining and materials firms. Meanwhile, iron ore spiked almost 11% as investors bet that China’s efforts to ease property woes will improve demand from the world’s top consumer of the steel-making ingredient.

The country’s ten-year sovereign bonds fell Monday, extending their biggest weekly drop in a decade, as investors pivoted toward risk assets on expectations a widespread stimulus blitz will revive economic growth.

The Fear and Greed Indicator of the Shanghai Composite Index, which measures the buying and selling momentum for the stock benchmark popular among China’s retail investors, rose to the highest since 2020 on Monday.

“I think the euphoric surge that we saw last week in China markets could turn into something more concrete and sustainable because there appears to be a complete policy shift that could finally address the cyclical headwinds of the past 3 years,” said David Chao, a strategist at Invesco Asset Management. “While there may still be debate over how these policy shifts are implemented and whether enough has been done, I think a new direction has been charted.”

–With assistance from Winnie Hsu and John Cheng.

(Updates prices, trading turnover)