China Enters Bull Market
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7/21/2019 China Enters Bull Market http://slidepdf.com/reader/full/china-enters-bull-market 1/2 China Enters Bull Market -- 2nd Update Posted on 5 November 2015 20:58 | By Chao Deng | Dow Jones Institutional News China entered a bull market Thursday, a surprising milestone after a volatile summer wiped out trillions in value from mainland equities and rattled global markets. The Shanghai Composite Index has gained 20.3% since Aug. 26, the bottom of the summer selloff. A bull market is defined as a rise of 20% from a recent low. The benchmark finished up 1.8% at 3522.8 on Thursday. The Shenzhen Composite Index, a benchmark of the mainland's smaller stock market, has rallied 32% from its bottom on Sept. 15. It closed up 0.2% at 2093.47. The ChiNext Price Index, a gauge of China's volatile startup shares, has rallied 43% from its bottom on Sept. 15. It finished down 0.8% at 2564.72. Investors gradually have returned to the market after a summer of panicked selling, which Beijing scrambled to stem. Trading volumes reached their highest level since mid-August on Thursday and investors are borrowing to buy stocks again. Margin loans are at their highest level in roughly two months, after dropping sharply in the throes of the rout, when investors rushed to sell holdings to repay money borrowed from brokerages. This summer, Chinese officials dug deep into their playbook for ways to stabilize the market, from pumping money into state-backed funds that bought blue chips to cracking down on short sellers and suspending initial public offerings. They even pledged to keep buying until the Shanghai Composite Index reached 4500--a goal still roughly 1,000 points away. Stocks rallied last month in anticipation that officials would announce easing measures after China reported its growth slowed to 6.9% in the third quarter, clouding its ability to reach a year-end target of about 7%. China has cut interest rates and the amount of reserves banks are required to hold three times since the start of the selloff, with the latest round of cuts in late October. Despite the gains, some investors are skeptical that the wounds from the summer have healed. "Lots of investors have been deeply hurt by the disastrous fall in summer, besides the regulator has basically barred investors from using leverage or hedging tools," said Gu Yuan, a retail investor from Shanghai who bought two stocks on the ChiNext board and have enjoyed 20% gains since September. The tentative success nevertheless has drawn investors eager to jump into a rally that the government helped create, said Steve Wang, research director at brokerage Reorient Group. "There is a feeling that people don't want to miss out on buying at the bottom." Analysts estimate the Chinese government has spent hundreds of billions of yuan buying stocks to stabilize the market, although officials haven't disclosed the exact amount since they announced their massive intervention efforts in early July. The consensus is that authorities have held on to stocks that they have bought into since the summer, if not adding more to their portfolio.
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China enters the bull market
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7/21/2019 China Enters Bull Market
http://slidepdf.com/reader/full/china-enters-bull-market 1/2
China Enters Bull Market -- 2nd Update
Posted on 5 November 2015 20:58 | By Chao Deng | Dow Jones Institutional News
China entered a bull market Thursday, a surprising milestone after a volatile summer wiped
out trillions in value from mainland equities and rattled global markets.
The Shanghai Composite Index has gained 20.3% since Aug. 26, the bottom of the summerselloff. A bull market is defined as a rise of 20% from a recent low. The benchmark finishedup 1.8% at 3522.8 on Thursday.
The Shenzhen Composite Index, a benchmark of the mainland's smaller stock market, hasrallied 32% from its bottom on Sept. 15. It closed up 0.2% at 2093.47. The ChiNext PriceIndex, a gauge of China's volatile startup shares, has rallied 43% from its bottom on Sept. 15.It finished down 0.8% at 2564.72.
Investors gradually have returned to the market after a summer of panicked selling, whichBeijing scrambled to stem. Trading volumes reached their highest level since mid-August onThursday and investors are borrowing to buy stocks again. Margin loans are at their highestlevel in roughly two months, after dropping sharply in the throes of the rout, when investorsrushed to sell holdings to repay money borrowed from brokerages.
This summer, Chinese officials dug deep into their playbook for ways to stabilize the market,from pumping money into state-backed funds that bought blue chips to cracking down onshort sellers and suspending initial public offerings. They even pledged to keep buying untilthe Shanghai Composite Index reached 4500--a goal still roughly 1,000 points away.
Stocks rallied last month in anticipation that officials would announce easing measures afterChina reported its growth slowed to 6.9% in the third quarter, clouding its ability to reach ayear-end target of about 7%. China has cut interest rates and the amount of reserves banks arerequired to hold three times since the start of the selloff, with the latest round of cuts in lateOctober.
Despite the gains, some investors are skeptical that the wounds from the summer have healed.
"Lots of investors have been deeply hurt by the disastrous fall in summer, besides theregulator has basically barred investors from using leverage or hedging tools," said Gu Yuan,
a retail investor from Shanghai who bought two stocks on the ChiNext board and haveenjoyed 20% gains since September.
The tentative success nevertheless has drawn investors eager to jump into a rally that thegovernment helped create, said Steve Wang, research director at brokerage Reorient Group.
"There is a feeling that people don't want to miss out on buying at the bottom."
Analysts estimate the Chinese government has spent hundreds of billions of yuan buyingstocks to stabilize the market, although officials haven't disclosed the exact amount since theyannounced their massive intervention efforts in early July. The consensus is that authorities
have held on to stocks that they have bought into since the summer, if not adding more totheir portfolio.
7/21/2019 China Enters Bull Market
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China Securities Finance Corp and Central Huijin Investment--the so-called National Team, agroup of state-backed companies and stockbrokers tasked to prop up the market--has boughtin shares of 49% of listed firms in total on the A-share market, with more than 1.3 trillionyuan ($205 billion) of market capitalization, according to Wind Information Co.
A sharp two-day rally gave the index a push, rallying a total of 6%. Stocks jumped 4% onWednesday when mainland shares had rallied on speculation, fueled by out-of-datecomments by the central bank, that Chinese authorities would roll out a new trading link tofurther open up their market to foreign investors.
In Shanghai, shares of brokerages outperformed on expectations that a rebounding marketwould translate into higher trading volumes. Industrial Securities Co., Everbright SecuritiesCo. and Huatai Securities Co. all hit their 10% maximum daily limit set by regulators.
Among 24 listed brokers, 22 received injection of funds from either China Securities FinanceCorp or Central Huijin Investment, according to their third quarter reports.
Gao Fei, a Beijing-based investor said he is bullish on the sector's gains, which represents thegovernment's commitment to attract retail investors.
"If the national team only props up the index for two days, average investors may not followsuit," he said. "I bet the rally will go on tomorrow."
China's market began to stabilize in September, when the unwinding of margin debt began totaper off. Loans hit a recent low of 906.7 billion yuan on Sept. 30.
The market picked up in October as investors tipped toed back into the market, pushingmargin loans up again. Shanghai's 10% gain in October marked the index's best month sinceApril.
Margin loans totaled 1.05 trillion on Wednesday, still down roughly 54% from a June 18 peak of 2.27 trillion yuan, according to Wind Info.
Daily trading volume jumped to 1.37 trillion yuan on Thursday, compared with a dailyaverage of 883.4 billion in October. Thursday's volume was up nearly four times from arecent low of 370.6 billion on Sept. 30 but still down about 40% from a record 2.4 trillionyuan on May 28.
Yifan Xie contributed to this article.
Write to Chao Deng at [email protected]
(END) Dow Jones Newswires
November 05, 2015 04:58 ET (09:58 GMT)
