China’s stock market registered its biggest rebound in more than a year on Monday after state media encouraged investors to enter the market and reap the benefits of a post-coronavirus economic boom.
State-owned Shanghai Securities News published a story on Friday titled “Hahahahaha! The signs of a bull market are getting clearer. “A Xinhua story on Monday said investors were” running “toward stocks, while a front-page editorial in the state-run China Securities Journal spoke of the prospect of a “healthy” bull market, adding that investors could expect a “wealth effect” from rising prices.
The country’s CSI 300 index of listed stocks in Shanghai and Shenzhen rose 5.7 percent with trading volumes doubling its recent average. More than 280 of CSI 300’s shares ended in positive territory, while many banks and brokerage firms rose at a daily high of 10 percent. The financial sector as a whole led the ranking, 9 percent more.
Analysts said Chinese authorities may be looking to raise prices in the hope that this will increase consumer spending and support a broader economic recovery. But China’s chorus of market support rekindled memories of 2014 and 2015, when state media more than twice applauded stock prices. That rally later unfolded dramatically with a 40 percent collapse.
Bloomberg data shows that margin loans in China, where brokers provide clients with funds to buy stocks, are at their highest level since 2015.
Feeding protests in this way “is incredibly dangerous,” said Michael Every, a strategist at Hong Kong-based Rabobank. “A move closer to 6 percent in a day when you consider the wall of real-world concerns to be quite revealing.”
In Hong Kong, the Hang Seng Index closed 3.8 percent higher to meet the technical definition of a bull market, or a 20 percent gain from a recent low.
Some analysts said retail investors in China, a dominant force in mainland China’s stock markets, were betting that the country’s economic recovery would gain momentum after controlling the spread of Covid-19. But others warned that state media’s apparent attempts to raise prices could reflect concerns of China’s capital flight at a time of mounting tensions with Washington.
Brokers noticed signs of activity on Monday from the so-called national team of buyers backed by the Beijing state, which are known to step in and support markets during periods of uncertainty. One noted unusually high trading volumes in continental markets and sharp increases in the share prices of state insurance companies, a popular trade among such institutions.
Chinese traders would now be looking at the official media for further indications that they should try to participate in the demonstration, said Ken Cheung, strategist at Mizuho Bank. “Bullish sentiment has been building up [the] last days, “he added.
Additional reporting by Thomas Hale in Hong Kong
