(Bloomberg) — Chinese stocks extended one of their most notable swings in history, rising for a ninth straight day as government stimulus lures investors back to one of the world’s hardest-hit markets.
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The CSI 300 index rose as much as 7.7% on Monday, the biggest jump since 2015, as traders rushed to buy shares in the final 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 surged more than 20%, heading toward 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 reduce mortgage rates. The latest measures were among the key elements of a sweeping stimulus package released on Tuesday that also included interest rate cuts, freeing up 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 the Shanghai and Shenzhen stock exchanges surpassed 1.6 trillion yuan ($228 billion) in the morning session, surpassing the total value of stocks that changed hands on Friday.
“The pace of change clearly reflects 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 the authorities’ support for the markets.”
Demand for Chinese stocks was so strong on Monday that several local brokerages experienced delays processing orders on their trading apps, local media reported, and some securities firms also saw a spike in requests to open new trading accounts. .
The latest setbacks came after a burst of trading led to glitches that overwhelmed the Shanghai Stock Exchange on Friday.
“Everyone has been very bearish and now everyone is struggling,” 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.” . “
Brokerages led the rally, with Citic Securities Co. hitting the 10% daily rise limit, given the perception that they are the most direct beneficiaries of the surge in stock trading. Almost all CSI 300 component stocks were in the green. A Bloomberg Intelligence gauge of Chinese real estate developers rose as much as 14%.
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 companies. Meanwhile, iron ore soared nearly 11% as investors bet China’s efforts to ease housing problems will improve demand from the world’s top consumer of the steelmaking ingredient.
The country’s 10-year sovereign bonds fell on Monday, extending their biggest weekly drop in a decade, as investors turned to risk assets on expectations that a widespread stimulus blitz would revive economic growth.
The Shanghai Composite Index Fear and Greed Indicator, which measures the buying and selling momentum of the stock benchmark popular among China’s retail investors, rose to the highest level since 2020 on Monday.
“I think the euphoric surge we saw last week in Chinese 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 last three years,” said David Chao. , a strategist at Invesco Asset Management. “While there may still be debate about how these policy changes are implemented and whether enough has been done, I believe a new direction has been charted.”
–With the help of Winnie Hsu and John Cheng.
(Updates with charts, price movements and new quotes)
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