China’s stock market surged to unprecedented heights on Tuesday, fueled by investor optimism and government pledges to stimulate the economy. The CSI300 index, a benchmark of blue-chip stocks, skyrocketed 10% to reach its highest level in nearly two years, while the Shanghai Composite Index rose 9.7% to its highest point since December 2021. In contrast, Hong Kong’s Hang Seng Index, which had reached a 2.5-year high on Monday, plummeted 2.8%. The yuan currency also took a hit, falling sharply to 7.0502 against the US dollar, while five-year bond futures dropped to their lowest level since July.
Market watchers are eagerly awaiting a press conference by the National Development and Reform Commission, scheduled for 0200 GMT, which is expected to provide further details on the government’s stimulus plans. The announcement of aggressive stimulus measures before the Golden Week holiday break had sent the CSI300 soaring 25% over five sessions, with trading volumes reaching record highs.
While some investors, such as hedge fund manager David Tepper, are bullish on China’s prospects, others are urging caution. Analysts at Bank of America warn that the market’s rapid gains may lead to a self-reinforcing “pain-trade” before the end of the year, and that the “buy everything” stage may soon come to an end. They recommend taking profits in consumer, property, and broker stocks, and instead focusing on big-cap internet and high-yield state-owned enterprises.
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