China Stocks Resume Rally to Seven-Year High on Stimulus Bets
Comment of the Day

April 07 2015

Commentary by David Fuller

China Stocks Resume Rally to Seven-Year High on Stimulus Bets

Here is the opening from this interesting article from Bloomberg:

The Shanghai Composite Index rallied to the highest level since March 2008, as large-company shares jumped on speculation the government will take more measures to boost the world’s second-biggest economy.

Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., the nation’s biggest lenders, advanced at least 2.6 percent. PetroChina Co., the No.1 energy company, increased 3.6 percent. China CNR Corp. and CSR Corp. both surged 10 percent after the trainmakers said their merger got regulatory approvals.

The Shanghai Composite rose 2.5 percent to 3,961.38 at the close. The benchmark gauge extended gains over the past year to 92 percent, the best performing major global index among 93 measures tracked by Bloomberg, amid speculation the central bank will extend cuts in borrowing costs and on increased use of leverage to buy stocks.

“It’s a bull market and funds keep flowing into the market,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “The market will continue to rise unless we see signals of a crackdown from regulators.”

The CSI 300 Index rose 2.2 percent. The Bloomberg China-US Equity Index added 1 percent in New York Monday. Mainland and Hong Kong markets were closed on Monday, with the latter set to resume trading on Wednesday.

David Fuller's view

The penultimate paragraph above may be the most helpful for actively managed funds.  

China is a controlled market so any warnings from regulators would be signal to take some profits.  These would almost certainly hit the Shanghai A-Shares Index first, as there is nothing overextended about Hong Kong’s HSI or HSCEI.


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