(Bloomberg) — Chinese stocks posted their most impressive turnaround in history, surging for a ninth straight day as government stimulus drew investors back to one of the world’s most battered markets.
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The CSI300 index rose as much as 7.7% on Monday, hitting its highest level since 2015, as traders rushed to buy stocks in the final trading session before a week-long holiday. The index lost more than 45% of its value from its 2021 high through mid-September, but has since soared more than 20% and headed toward a technical bull market. Last week’s rise was the biggest since 2008.
The gains widened after China’s three largest cities eased restrictions on homebuyers and the People’s Bank of China moved to lower mortgage rates. The latest measures were among the key elements of a sweeping economic stimulus package announced on Tuesday, which also included lower interest rates, freeing up cash to banks and supporting equity liquidity.
Investors, who have faced several false dawns in recent years, may be betting that current momentum may be sustainable. In a sign that the frenzy continues, combined trading volume on the Shanghai and Shenzhen stock exchanges exceeded 1.6 trillion yuan ($228 billion) in morning trading, exceeding the total amount of stocks traded on Friday.
“The pace of the reversal clearly reflects how oversold the market was,” said Charu Chanana, global market strategist at Saxo Markets. “There is a clear belief that this time will be different when it comes to the authorities’ support for the market.”
Local media reported that demand for Chinese stocks was so strong on Monday that several local brokerages experienced delays in processing orders on their trading applications, and some brokerages saw a surge in applications to open new trading accounts. It was reported that they were doing so.
The issue arose after a glitch occurred on Friday due to a surge in trading that overwhelmed the Shanghai Stock Exchange.
“Everyone used to be so bearish, but now everyone is panicking,” said Andy Maynard, head of equities at China Renaissance Securities Hong Kong. “Last week was the busiest period we’ve ever seen for China and Hong Kong.”
Recognizing that securities companies are the most direct beneficiaries of the rise in stock trading, CITIC Securities led the rally, reaching the daily price increase limit of 10%. Almost all of the CSI 300 constituents were in the green. A Bloomberg Intelligence index of Chinese real estate developers rose as much as 14%.
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New optimism for the world’s second-largest stock market is also spreading globally, with hedge funds selling U.S. tech stocks and rushing into mining and materials companies. Meanwhile, iron ore soared about 11% as investors said China’s efforts to ease the real estate crisis would improve demand from the world’s biggest consumer of steel raw materials.
The country’s 10-year Treasury bond fell on Monday, its steepest weekly decline in a decade, as hopes that a broad stimulus package would revive economic growth pushed investors into riskier assets.
The Shanghai Composite Index’s Fear and Greed Index, which measures buying and selling momentum in stock benchmarks popular among Chinese retail investors, rose to its highest level since 2020 on Monday.
“I think the euphoric surge we saw in the Chinese market last week could turn out to be more tangible and sustainable, as we will see a full recovery that can finally address the cyclical headwinds of the past three years. Because there appears to be a policy shift taking place,” said David Chao. Strategist at Invesco Asset Management. “While there may still be debate about how these policy shifts will be implemented and whether enough has been done, I think they have set a new direction.”
–With assistance from Winnie Hsu and John Cheng.
(Updates charts, price movements, new quotes)
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