Does the US$228 billion China stock rally herald an end to the three-year rout?
- Optimism is building in the onshore market after foreign investors sparked a rally, which was ably assisted by a rising yuan, boosting the market cap by US$228 billion
- Analysts say Chinese onshore stocks are on the cusp of an uptrend, with odds firmly stacked in their favour
A US$228 billion rally in Chinese stocks has sparked hopes that three years of losses may be nearing an end, as foreign buyers return and investors reassess yuan-linked assets.
China’s US$9.4 trillion market received a year-end boost from a 2.3 per cent jump in the benchmark CSI 300 Index on Thursday, its steepest advance in five months.
Adding to the optimism about the sustainability of the run, overseas traders scooped up 13.6 billion yuan (US$1.9 billion) of onshore stocks through the exchange link, the most since July 28, according to Hong Kong stock exchange data. The yuan rose to its strongest level against the US dollar in almost seven months.
The gains in stocks and the Chinese currency, which caught investors off guard, have rekindled optimism that the worst for yuan assets is already behind it, as valuations fall to attractive levels and bets on further policy easing mount.
The CSI 300 Index fell 11 per cent this year, an unprecedented third consecutive annual loss. The yuan at one point slumped to a 16-year low, as property market woes and debts of local governments weighed on the economic outlook.