China entered a bull market Thursday, a surprising milestone after a volatile summer wiped out trillions of dollars in value from mainland equities and rattled global markets.

The Shanghai Composite Index has gained 20.3% since Aug. 26, the bottom of the summer selloff. A bull market is defined as a rise of 20% from a recent low.

The benchmark finished up 1.8% at 3522.82 on Thursday, bringing its year-to-date gains to 8.9%, but it is still down 32% from its 2015 high reached on June 12.

China’s smaller Shenzhen Composite Index and a gauge of China’s volatile startup shares have rallied 32% and 43%, respectively, from their recent lows on Sept. 15. On Thursday, the Shenzhen Composite closed up 0.2% at 2093.47, while the ChiNext Price Index slipped 0.8% to 2564.72. The Shenzhen market has gained 48% this year, while the ChiNext is up 74%.

Investors have gradually returned to the market after the summer selloff, which Beijing scrambled to stem. Trading volumes have reached their highest level since mid-August and Chinese investors are borrowing from their brokerages again to buy stocks.

Margin loans have climbed to their highest level in roughly two months after dropping sharply in the throes of the rout, but are still down roughly 54% from a June 18 peak of 2.27 trillion yuan ($358 billion), according to Wind Information Co. On Wednesday, margin loans totaled 1.05 trillion yuan.

Global stocks have also been rebounding from a tumble in August, when China devalued its yuan in a surprise move that raised doubts about Beijing’s ability to transition the world’s second-largest economy to a more market-oriented system. The MSCI World Index has risen almost 11% since late September.

Chinese officials dug deep into their playbook for ways to stabilize domestic markets, including pumping money into state-backed funds that bought blue-chip stocks and cracking down on short sellers and suspending initial public offerings. They even pledged to keep buying stocks until the Shanghai Composite Index reached 4500—a goal still roughly 1,000 points away.

Stocks rallied last month in anticipation that officials would announce easing measures, after China reported that its growth slowed to 6.9% in the third quarter, clouding its ability to reach a year-end target of about 7%. China has cut interest rates and the amount of reserves banks are required to hold three times since the start of the summer selloff, with the latest round of cuts in late October.

David Fuller's view

Here is a PDF of the WSJ article.

China is not for every investor, as I have said before.  Nevertheless Xi Jinping is tough and determined to manage the stock market, rather than be managed by it.  He is learning on the job but I would not be too critical.  Xi will want firm share prices more often than not but can the same be said for Wall Street’s HFT programmes which control most of the volume?  I think not. 

Xi is using monetary policy to buy a stock market recovery and a somewhat faster rate of GDP growth.  For all the worry about China, the Shanghai Composite Index is currently 6.47% higher in USD on the year to date, compared to the S&P 500 Index’s gain of 1.99%.  The outlook for both markets is favourable over the medium term.