In a stunning reversal of fortunes, China’s stock market has entered a ninth consecutive day of gains, fueled by a comprehensive stimulus package unveiled by the government. The CSI 300 Index surged as much as 6.5%, its largest daily increase since 2015, as investors clamored to get in on the action before a week-long holiday. This remarkable turnaround has seen the index rebound by over 20% from its mid-September lows, putting it on track for a technical bull market.
The catalyst for this rally lies in the government’s sweeping stimulus measures, which include relaxation of homebuying rules in three major cities, interest rate cuts, and increased liquidity support for the stock market. The central bank’s decision to lower mortgage rates has also played a significant role in boosting investor confidence.
As a result, brokerages have emerged as top performers, with Citic Securities Co. hitting its daily upside limit of 10%. An astonishing 99% of CSI 300 component stocks are trading in positive territory, indicating a broad-based rally.
The frenzy has spilled over into international markets, with hedge funds rotating out of US technology stocks and into mining and materials firms. According to Charu Chanana, global markets strategist at Saxo Markets, “The pace of this turnaround is a testament to how oversold the market was. There’s a growing conviction that this time, authorities’ support for the markets will be sustained.”
David Chao, strategist at Invesco Asset Management, concurs, stating, “I believe the euphoric surge we saw last week could translate into a more concrete and sustainable upswing, driven by a fundamental shift in policy direction. While implementation risks remain, a new trajectory has been charted.” As investors continue to pile into the market, it remains to be seen whether this remarkable rally can maintain its momentum in the weeks ahead.
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