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July 7, 2020

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China stocks skyrocket as policy easing pays dividends

CHINA stocks skyrocketed yesterday with the overall turnover of A shares hitting a five-year high.

The benchmark Shanghai Composite Index surged 5.71 percent to close at 3,332.88 points, the highest figure since early 2018.

The smaller Shenzhen Component Index soared 4.09 percent to 12,941.72 points.

The ChiNext ended 2.72 percent higher at 2,529.49 points, while the blue chip CSI300 Index surged 5.67 percent to 4,670.09 points, its highest since June 25, 2015.

Trade volume on the two major bourses added up to 1.57 trillion yuan (US$220 billion), up 394.5 billion yuan from the previous session to reach the highest level in five years. 

Overseas capital swarmed into the Chinese mainland markets, posting a net influx of 13.65 billion yuan via the Stock Connect schemes linking Shanghai and Shenzhen with Hong Kong.

As for individual shares, nearly 280 listed firms posted gains of more than 9 percent, while none declined by over 9 percent, pushing the total market value of China’s A-shares to over US$10 trillion, a record high since June 2015.

Financial shares led the charge yesterday, with the CSI SWS securities index surging 9.8 percent to their highest level since November 2016.

Over 20 brokerages surging by the daily limit of 10 percent, including The Pacific Securities Co, Xishui Strong Year Co Ltd Inner Mongolia, and Sinolink Securities Co.

Banks also performed strongly, with at least 20 posting gains hitting the 10 percent cap, including Chongqing Rural Commercial Bank, China Merchants Bank Co and China Zheshang Bank Co.

Real estate shares also jumped sharply, with over 10 listed firms up by 10 percent. 

Insurance firms, the national defense and military industry, catering and tourism shares, and semiconductor companies were all big gainers.

Meanwhile, the household liquor maker Kweichow Moutai Co saw its shares rise 3.78 percent to a record 1,600 yuan as consumption warms, fueling investor confidence in the liquor sector.

On the STAR Market, 113 of the 118 listed firms advanced, while the others posted losses. National Silicon Industry Group Co rose the most by 20 percent to hit the daily limit, while Beijing Balance Medical Technology Co shed 4.24 percent.

Policy easing and continued reforms in the capital markets, including a revamp for the benchmark Shanghai index and a registration-based IPO system for the start-up board, helped shore up investor confidence.

“China has become a safe haven for investors now, as the recent coronavirus outbreak in Beijing helps investors realize the impact from a second wave of outbreak, if any, in the country would be very limited,” said Zhang Chengyu, vice general of Beijing-based Shiji Hongfan Asset Management Company.

“The rally now is just the beginning of a strong rising trend, and more money would pour into the A-share market,” Zhang added.

Guotai Junan Securities also expects to see further increases in the major stock indexes. Under the downward trend of risk-free interest rates, the asset allocation value of the stock markets is rising and more incremental funds are cramming into the markets.


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