China’s stock rally propels another index toward bull market

A woman holding a child looks at the Bund Bull statue in Shanghai, China. (Bloomberg pic)

SHANGHAI: A US$1 trillion rally in Chinese stocks has another equity gauge headed for a bull market.

The CSI 300 Index rose as much as 4.6% Monday, extending its gain from a Jan 3 low to more than 20% – the level that typically denotes a bull market after a drop of the same size.

The gauge of shares listed in Shanghai and Shenzhen is still around 16% below its 2018 peak.

China’s small-cap ChiNext Index entered a bull market Friday and jumped as much 5.6% on Monday to its highest since August.

Investors are embracing risk as the US and China appear to be making progress on trade talks and after the new head of the country’s securities watchdog lifted some trading curbs.

A measure of margin debt in China’s stock markets is rising after hitting its lowest level in more than four years on Feb 1.

“Even if stocks retreat in the short term, there’s still room for further gains as leverage is still way below the peak despite the increase,” said Shen Zhengyang, a Shanghai-based strategist with Northeast Securities.

“Investors also have to bear in mind that economic fundamentals are still bad, so in order to avoid getting burned in a likely more volatile market, it’s key to always remain wary.”

The change in investor sentiment has also boosted the yuan, which is the best performer among major currencies since Feb 1, strengthening 0.9% against the dollar.

The currency was up 0.4% at 6.6888 as of 1.22 pm in Shanghai.