China’s stock market extends historic rally to 8 consecutive weeks of gains – the longest weekly winning streak since 2020. Chinese stocks extended their winning streak for the eighth consecutive session, buoyed by a series of support measures aimed at alleviating bearish sentiment. The CSI 300 Index, after a volatile start, closed 0.9% higher on Thursday, marking its longest stretch of gains since July 2020. Similarly, the Hang Seng China Enterprises Index surged nearly 2% in Hong Kong. Chinese stocks have rallied for 8 straight weeks, marking the longest weekly winning streak since 2020. The indexes have added over 15% year-to-date, fueled by optimism around post-pandemic economic reopening and supportive policy initiatives. Investor sentiment continues rising.
Beijing has implemented various policy levers, including restrictions on equity net sales, underscoring authorities’ efforts to revitalize the $8.7 trillion stock market. While this month’s rebound indicates that these measures, along with state fund purchases and a crackdown on quantitative trading, have stabilized the market decline, some analysts view it as a temporary upswing that may diminish once support measures taper off.
“We acknowledge the potential impact of recent restrictions on sparking a technical rebound in the Greater China market in the short term,” stated Homin Lee, senior macro strategist at Lombard Odier. “However, the market’s long-term trajectory will ultimately be dictated by fundamental factors rather than technical adjustments of this nature.”
To bolster market confidence, regulatory efforts have intensified since the appointment of a new chief at the China Securities Regulatory Commission earlier this month. The regulator has barred major institutional investors from reducing equity holdings at the beginning and end of each trading day, Bloomberg reported.
Foreign funds injected 3.7 billion yuan ($515 million) into onshore shares via trading links with Hong Kong on Thursday, continuing their buying spree after acquiring over 13 billion yuan in the previous session.
“In the short term, these measures should at least halt the market’s downward spiral,” noted Kerry Goh, chief investment officer at Kamet Capital Partners Pte. “Machine-driven, large-scale transactions should be restricted to prevent an unforeseen crash.”
In a positive development, Beijing has initiated the drafting of a law to promote private sector economic development. The law will address key concerns of private companies, such as property rights protection and entrepreneur interests, according to state media reports.
Chinese and Hong Kong equities suggests lingering investor caution
While the recent market rally has been encouraging, rising short interest in Chinese and Hong Kong equities suggests lingering investor caution, as noted by Morgan Stanley strategists. This caution is reflected in the ongoing cautious sentiment among investors despite the market’s positive momentum.
Liu Xiaodong, fund manager at Shanghai Power Asset Management
“People have been cautiously optimistic since the authorities demonstrated their commitment to addressing market issues with the appointment of the new CSRC head,” said Liu Xiaodong, fund manager at Shanghai Power Asset Management Co. “The new chief has shown determination to address longstanding market issues.”
The sustained market rally, coupled with ongoing regulatory efforts and economic reforms, signals a cautiously optimistic outlook for Chinese stocks in the near term.
