China’s onshore stocks look set to break free from four months of sideways trading on the back of rising turnover and foreign buying, while leveraged bets have risen to a five-year high. A victory for Joe Biden in the US presidential election and the promise of a largely effective Covid-19 vaccine from Pfizer and BioNTech have removed uncertainty clouding stocks as traders factor in relatively stable US-China relations and a solid global recovery, analysts said. The Shanghai Composite Index is now within 3 per cent of rising above a 250-point range that has held back the benchmark since July. It dropped 0.4 per cent on Tuesday after climbing 1.9 per cent a day earlier. Some metrics signal that a breakthrough is imminent. Combined trading values of the mainland-traded stocks topped 1 trillion yuan (US$151.4 billion) for the first time since August on Monday, overseas buying surged to a one-year high of 19.7 billion yuan and the outstanding balance of margin trading rose to 1.44 trillion yuan – the highest level since 2015. “There will be a re-rating of low-valuation cyclical stocks, such as commodity producers and financials,” said Zhang Xia, an analyst at China Merchants Securities. The mainland-traded stocks are “expected to conquer the high and the run-up will last beyond the end of the year.” While the Shanghai Composite is among the world’s top-performing gauges with a 10 per cent gain this year, Chinese stocks have lagged the yuan . The local currency is at the strongest level against the US dollar in more than two years, as China is poised to become the world’s first major economy to post positive full-year growth after successfully containing the coronavirus pandemic. The latest data shows that the recovery in the world’s second-largest economy is firming up, with exports in October beating analysts’ expectations. Other key figures on industrial output and retail sales are due on Monday. With regards to corporate earnings, the overall third-quarter profit of Chinese companies trading on the onshore exchanges rose 17.5 per cent from a year earlier, reversing a decline of 18 per cent for the previous three-month period, according to Wanlian Securities. Some re-ratings of stocks have already taken place. Consumer-discretionary companies including carmakers and materials stocks have emerged as the best-performing sectors over the past month, rising at least 12 per cent. That preceded rotational buying of such cyclical stocks in overnight US trading, which was spurred by the news that the Covid-19 vaccine is more than 90 per cent effective. “The vaccine has eased concerns over the more vulnerable sectors, such as airlines, travel, energy and commodities,” said Tai Hui, a strategist at JPMorgan Asset Management in Hong Kong. “The reaction overnight shows the vaccine, and higher bond yields, are important catalysts for a rotation towards the pandemic laggards, such as consumer discretionary, travel, energy, commodities and financial sectors.”