Chinese shares at 2-year high, showing market resilience to virus

SHANGHAI: Chinese stocks jumped to their highest in two years, erasing the last of the declines fueled by the coronavirus outbreak.

The CSI 300 Index closed up 2.2% Thursday at 4206.73, on pace for its best week since November 2015.

Stocks globally are rebounding as virus worries recede for equities investors with central banks swinging into action.

US shares, after their worst week since the financial crisis, are on pace for their best since 2011.

It took Chinese equities just two weeks to reverse a record US$720 billion rout last month, part of the resilience its markets have shown in the face of the outbreak.

Stock investors have in recent days shifted to sectors like infrastructure which would benefit from fiscal stimulus pledged by authorities to stem the virus’ economic impact.

The Federal Reserve’s interest-rate cut has also added fuel to a rebound in emerging markets.

China’s yuan on Wednesday erased losses since the virus prompted the government to order a drastic shutdown of the economy, with stimulus expectations and a weaker greenback supporting the currency.

“Expectations for further Fed rate cuts are helping the markets,” said Banny Lam, managing director and head of research at CEB International Investment Corp in Hong Kong.

The continued slowdown in new coronavirus cases is also aiding Chinese equities, he added, “so the sentiment is turning better. But we need to be careful because this could be just a technical rebound” as Chinese manufacturing production has been modestly resuming.

China’s stock rebound the past month has also coincided with a jump in trading activity. The value of equities changing hands has topped 1 trillion yuan in 11 of the past 12 sessions, a run not seen since 2015.

Meanwhile, foreign investors have reversed some of last week’s record selling of mainland equities. Average daily buying this week has been 2.2 billion yuan.

But China’s tech sector, which led last month’s equities rebound, has lagged in recent days.

The smaller-cap ChiNext Index, which was recently at a three-year high relative to the CSI 300, is 3.4% below last month’s best level.

Investors rotating into infrastructure firms and banks may continue, said Guo Feng, an investment adviser at Northeast Securities Co.

Some fund managers might move money into those sectors, he added, as authorities may be looking to keep tech from overheating.

E-Fund Management Co announced there will be a maximum size for an upcoming tech exchange-traded fund.