China’s stock market is experiencing a remarkable revival as investors flock to equities, driven by a wave of government policies and a fear of missing out on what some believe could be an unprecedented rally.
Brokerages are bustling with retail investors, resulting in overloaded trading systems as money shifts from bonds and savings accounts into stocks. This surge has led to increased stock turnover and rising yields. “Deposit rates are too low, and real estate investment is no longer safe,” said Darren Wang, a 30-year-old office worker who has begun investing in stocks with borrowed funds. “There’s no other way to get rich than to bet on stocks.”
After enduring three years of stagnation due to sluggish economic recovery and a debt crisis in the property sector, the mood changed dramatically last week. The CSI300 Index soared 16%, marking its best week since 1998, following the government’s announcement of a stimulus package that includes interest rate cuts and a $114 billion fund aimed at bolstering share prices.
While many policies are yet to be implemented and their efficacy remains uncertain, investors are optimistic. “Life has been tough for so long; finally, it’s time to make some money,” noted Wen Hao, a manager at a tech startup in Hangzhou, who purchased energy stocks. He likened the current situation to the 2015 bull run when the Shanghai benchmark doubled in six months, attributing this optimism to significant “state-backed money” entering the market.
The central bank recently introduced a 500 billion yuan ($71.3 billion) swap program to finance stock purchases by brokers, funds, and insurers, alongside a 300 billion yuan re-lending facility for share buybacks by listed companies. Both initiatives are expected to expand.
On Monday, the CSI300 Index increased by over 8%, continuing last week’s momentum. Shanghai stocks surged more than 7%, while Shenzhen shares jumped over 10%, with a total turnover of 2.6 trillion yuan—surpassing previous bull markets.
“The 2014-15 bull run was fueled by illegal margin financing; this time, it’s backed by the central bank,” a hedge fund manager commented. He emphasized that the current rally seems more influenced by liquidity and investor sentiment than by solid economic fundamentals.
The China Securities Journal, in an editorial, signaled official support for the rally, asserting that revitalizing the stock market will boost investor confidence and aid economic recovery.
Nationwide, brokerages that were quiet just a week ago are now flooded with new investors eager to open accounts or borrow funds for trading. The demand is so high that clearing services worked through the weekend to accommodate new account approvals. Guotai Junan Securities has even mobilized additional staff to handle the influx ahead of the National Day holiday.
Zion Zhong, a manager at Citic brokerage’s Suzhou branch, confirmed a significant increase in margin financing requests. “We’re many times busier than before,” he noted.
This heightened trading activity has resulted in delays at the Shanghai stock exchange, prompting tests over the weekend to ensure system reliability.
As money flows out of safer assets, China’s 30-year treasury bond futures fell to a two-month low, plunging 3.6% last week—their worst performance to date. Zhao Jian, head of Atlantis Finance Research Institute, predicted an “epic scale” migration of funds, with trillions moving from bonds and fixed-income products into equities.
The past three years of a bear market have created a substantial pool of short-term investors eager to recover their losses. “The bull run will likely continue with few significant corrections,” Zhao cautioned, though he warned that many may end up losing when the market eventually turns.
Veteran trader Wu Jie, 48, expressed his surprise at the sudden market shift. “The economy remains in bad shape,” he said, while remaining cautious in his stock positions. “I’m ready to invest when a major correction occurs.”
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