China’s stocks take just 32 days to enter bull market as Morgan Stanley and Goldman Sachs see no signs to sell

Morgan Stanley and Goldman Sachs say strong momentum in China stocks will continue

Shanghai Composite has climbed 18 per cent so far in 2019, making it the world’s best performing major benchmark

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The running of the bulls is shown at the San Fermin fiestas in Pamplona in northern Spain on July 8, 2012. China’s bull market began quickly, raising questions about how long it can last. Photo: Associated Press

Published: 8:19am, 1 Mar 2019Updated: 10:45pm, 1 Mar 2019

It took just 32 trading days for China stocks – the world’s worst performers last year – to gallop into bull territory. Global investment banks say this bull still has room to run.

After struggling with a 25 per cent dive in 2018, the benchmark Shanghai Composite Index has surprised global investors with a dramatic comeback.

Its 20 per cent rise through Monday from a January low ushered in the technical entry of the bull market.

The rally is exhibiting some signs akin to a major crash in 2015, such as the revival of leveraged buying and the rapid run-up of gains in share prices. But Morgan Stanley and Goldman Sachs say the strong momentum will continue, echoing the call by Hong Hao from Bocom International Holdings and Chen Li with Soochow Securities.

Morgan Stanley this week raised its year-end target of China’s CSI 300 Index of big companies by about 18 per cent, citing government policy support for the economy, the improving outlook of the yuan and the upbeat mood on the China-US trade talks. The projection of 4,300 for the CSI 300 implies a 17 per cent gain from the gauge’s close on Thursday.

“We have observed significant sentiment improvement since the Lunar New Year, and believe this is a long due result of a series of policymakers’ efforts aimed at improving the A-share market dynamics and momentum,” said Laura Wang, a strategist at Morgan Stanley. “However, we do not believe the market is becoming overheated at this state because A-share market’s valuation relative to the emerging markets is still reasonable and attractive, and current daily turnover is still well within the trading range during 2016 and 2017.”