China’s stock market is nearly to bull market highs following the Lunar New Year holiday.
The largest listed businesses in Shanghai and Shenzhen are tracked by the CSI 300, which finished at 4,201.35, up 19.7% from its most recent low of 3,508.70 on October 31 of last year.
Hao Hong, chief economist at GROW Investment Group, wrote in a note on Sunday that “China’s savings glut, which many view as a sign of severe risk aversion, can be the fuel for a spring rally.”
On Monday, the first day back after the Lunar New Year break, China’s onshore A-shares were trading very near to bull market territory.
According to Refinitiv’s statistics, the CSI 300, which monitors the equities of the biggest publicly traded businesses in Shanghai and Shenzhen, finished at 4,201.35 on Monday, up 19.74% from its most recent low of 3,508.7 set on October 31 of last year.
Technically speaking, a bull market is when stock prices rise by at least 20% from recent lows.
In order to honor the Lunar New Year vacation, China’s markets were closed for a whole week. The national tourism revenue increased by 30% from 2022 to 375.84 billion yuan ($55 billion USD), albeit it fell short of expenditure in 2019, before the pandemic. According to official data, travel and consumer spending increased compared to a year ago.
On Monday, the China AMC CSI 300 Index ETF, which monitors the index’s performance, was up 18% from its October lows.
According to the State Council meeting’s brief, Chinese Premier Le Keqiang promised to make consumption the “primary driving engine of the economy.” According to the press release, the summit also underlined the significance of sustaining growth, employment, and international commerce.
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The Chinese New Year bulls According to Tina Teng, analyst at CMC Markets, “A shares have mostly been lifted by the stimulus monetary policy and reopening optimism.”
She continued by saying that additional advances were spurred by supporting measures in the real estate industry and a lessened focus on Chinese tech firms.
As China’s reopening process advances, investors are moving their money from fixed-income to equity markets, according to Teng.
Upcoming spring rally
The excessive household savings in China, according to Hao Hong, chief economist at GROW Investment Group, will support a prolonged rise in stock prices.
“Intense speculating is just beginning. “Many [saw] China’s savings glut as a sign of excessive risk aversion, but it can fuel a spring rally,” he said in a note on Sunday.
The market will react as households begin to spend more and save less as the economy recovers, he continued. The market has jumped back to life in the Year of the Bunny.
This year, China’s economy will likely stand out as one that is rapidly expanding: China’s economy would do better than its international counterparts in 2023, according to strategist Min Chen, head of China portfolio manager at Somerset Capital.
He added that he anticipates supporting measures for the sector and sees “deregulation signals” for technology platform businesses, adding that “we do assume, in this year, that Chinese policymakers have a lot of room to further help the economy.”
This means that, despite a weakening global economy, China has a solid opportunity to stand out as a fast-growing country this year.