Stock markets in China soar ahead of National Day Holiday

Chinese stock markets went on a boom under the influence of a galore of stimulus measures that greatly boosted investor optimism and self-confidence about the country’s ability to bounce back economically.

The Shanghai Composite Index rose by 8.03 percent to close at 3,335.44 points on Monday, while the Shenzhen Component Index surged higher at a more double-digit gain of 10.68 percent, closing at 10,530.85 points. But the biggest percentage gainer was ChiNext Index, China’s Nasdaq-style growth enterprises track, which surged 15.52 percent to close at 2,178.04 points.
The rally came ahead of the last trading day before China’s week-long National Day holiday, when the markets will remain shut from Tuesday to October 7.

All stimulus policies have been rolled out sharply, some even better than the market expected, and the stock market has reacted dynamically, attracting a widespread investor base, Lou Feipeng, the research manager at China Postal Savings Bank, explains.

Property stocks lead the surge

On Monday, stock turnover of the Shanghai and Shenzhen exchanges reached a record high of more than 2.5 trillion yuan, or about $356.76 billion. Real estate stocks scored notably, driven also by a Sunday ruling from China’s central bank ordering commercial banks to lower interest rates for mortgages they had sold to customers by October 31 as part of broad moves to assist the under-pressure real estate sector.

And Guangzhou said it would lift all restrictions on home purchases, and also open up additional purchases in Shanghai and Shenzhen. Property stocks soared on the day. The most influential developer, Greenland Holdings, rose 10% to 2.08 yuan, and Gemdale also rose 10%, closing at 5.47 yuan.

Broader stimulus plans

The rally followed an announcement that the government will execute a much bigger-than-expected economic stimulus package to bring new vigor to the economy. Some of the key measures included reducing the reserve requirement ratios of the banks as well as the mortgage rates on existing homes.

The CB has also added new instruments in favor of the capital market. For example, a swap program will help funds, insurers, and brokers make funding more accessible to obtain stocks. The Political Bureau of the Communist Party of China met last Thursday and issued a call for “efforts to ‘boost the capital market and channel medium- and long-term funds into it.'”

Analyst Wang Yifeng of Everbright Securities said that these policies will give a good foundation both for growth in market transactions and for stock valuations going forward.

Increased investor confidence

The stimulus plans ignited positive sentiment among investors both domestically and abroad. Billionaire hedge-fund manager David Tepper said last week that he was “all-in” on China and was going to put “a lot of money” into Chinese stocks, ETFs, and futures.

In a further strong endorsement of the country’s economic prospects, overseas inflow into Chinese stocks has continued steadily as the appeal of the country’s shares in the global market continues to grow. Many domestic brokers are expected to work overtime during the National Day holiday as more people rush to open investment accounts, with industry insiders attributing it to a “fear of missing out” factor on the current trend of the market.

“Capital is pouring into the market, and investors are looking to grab the opportunity,” said Zhou Maohua, a macroeconomic researcher at Everbright Bank.