China’s stocks awakened by record foreign buying as brokerages call for a market rally, policy easing

Shanghai Composite Index rose to a three-month high, breaking out of 200-point trading range since March following upbeat broker reports

Foreign funds added to purchases on Wednesday, after scooping up US$3.4 billion of stocks in a record binge on Tuesday

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China’s stock market is awakened from three months of listless trading amid record foreign purchases. Photo: Shutterstock

Published: 4:30pm, 26 May 2021Updated: 5:30pm, 26 May 2021

Some of China’s biggest brokerages are calling for an easing of policy, awakening the stock market from a three-month slumber. Foreign funds responded with a record amount of purchases, after staying clear of the risk of policy tightening since the start of the year.

Net buying of Chinese onshore stocks amounted to 21.7 billion yuan (US$3.4 billion) through the Connect scheme with Hong Kong on Tuesday, according to exchange data. That is the biggest rush since the cross-border channel was introduced in 2014.

Offshore funds bought another 9.1 billion yuan of Chinese stocks on Wednesday, bringing the tally so far this year to almost 190 billion yuan, according to Bloomberg data. The Shanghai Composite rose 0.3 per cent to 3,593.36 at the close on Wednesday, adding to a 2.4 per cent jump on Tuesday to the highest level in three months.

“Investors should be looking for opportunities to jump onto the boat,” said Zeng Wanping, an analyst at China Galaxy Securities. “There’s no systemic risk currently, but it still remains to be seen if this will turn into a raging bull market.”

The inflows helped the Shanghai Composite Index break out of the tight sideways trading pattern it had been stuck in since March. The rally may be forming the base for an uptrend that Guotai Junan Securities predicted will pave the way to 4,000 points, a level not seen since the market meltdown of 2015.

Explanations for the sudden breakout in the benchmark index range from a crackdown on surging commodity prices and cryptocurrencies, to a strengthening local currency and the outlook for policy easing, analysts said.

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