State-owned Shanghai Securities News published an article on Friday entitled “Hahahahaha!” The signs of a bull market are becoming increasingly clear. A Xinhua article on Monday said investors were “rushing” for stocks while a front-page editorial in the state-run China Securities Journal on Monday raised the prospect of a “healthy” bull market, adding that investors could rejoice in the “wealth effect” of rising prices.
The country’s CSI 300 index of stocks listed in Shanghai and Shenzhen jumped 5.7% with transaction volumes more than double their recent average. Over 280 of the CSI 300’s shares finished in positive territory, while many banks and brokerage firms rose 10% maximum per day. The financial sector as a whole tops the ranking, up 9%.
Analysts said the Chinese authorities could seek to push prices up in the hope that it would stimulate consumer spending and support a broader economic recovery. But the support choir for Chinese markets brought back memories of 2014 and 2015, when state media applauded a doubling of stock prices. This rally then went spectacularly with a collapse of 40%.
Bloomberg data shows that margin lending in China, where brokers provide clients with funds to buy stocks, is at its highest level since 2015.
Feeding the gatherings in this way “is incredibly dangerous,” said Michael Every, a Hong Kong-based strategist at Rabobank. “A movement of almost 6% in one day when you consider that the wall of worries in the real world opens your eyes.”
In Hong Kong, the Hang Seng index closed up 3.8% to meet the technical definition of a bull market, a gain of 20% from a recent trough.
Some analysts have said that retail investors in China – a dominant force in the continent’s stock markets – are betting that the country’s economic recovery is accelerating after controlling the spread of Covid-19. But others have warned that apparent attempts by state media to drive up prices may reflect concerns over a capital flight from China at a time of mounting tensions with Washington.
Brokers noted signs of activity by the so-called national team of Beijing-backed buyers on Monday who are known to intervene and support the markets during times of uncertainty. One highlighted unusually high trading volumes on the continent’s markets and a sharp rise in the stock prices of public insurance companies, a popular trade among these institutions.
Chinese traders will now monitor the official media to see if they should try to join the rally, said Ken Cheung, strategist at Mizuho Bank. “A bullish feeling has arisen [the] these last few days, “he added.
Additional report by Thomas Hale in Hong Kong