The Reasons Why China's Stock Rally Is Nearing $1 Trillion
Comment of the Day

February 20 2019

Commentary by Eoin Treacy

The Reasons Why China's Stock Rally Is Nearing $1 Trillion

This article from Bloomberg News may be of interest to subscribers. Here is a section:

The rally since January has added more than $893 billion to the value of the country’s equities, lifting Shenzhen’s risky startups and state-backed giants alike. The rebound has been so quick and widespread that it’s already triggered signs of overheating in four of China’s major benchmarks. The CSI 300 Index’s 15 percent rally is its best start to any year in a decade, and turnover across all exchanges is near the highest since March.

While valuations have been low for months, Chinese equities really took off only after another set of weak economic data made monetary policy easing almost a certainty. Gains intensified when the new securities watchdog eased restrictions on trading, encouraging an increase in leveraged bets. Ample liquidity and a streak of foreign buying have fueled volumes.

“It’s essentially a reflection of change in investor expectations,” said Wang Chen, a Shanghai-based partner with XuFunds Investment Management Co. “The rally’s been driven by a return in risk appetite and a valuation catch-up.”

Eoin Treacy's view

Bull markets in China tend to be state sponsored. China’s stock market is dominated by the actions of huge numbers of retail investors who are accustomed to taking cues from the government on when to participate.

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