China’s stock rebound resembles 2015 rally as trading blitz surpasses trillion-yuan threshold
- Combined daily turnover in Shanghai and Shenzhen has surpassed 1 trillion yuan for 38 days, approaching the record 43-day streak in 2015
- Most of the liquidity has powered gains in small-cap stocks as traders fall back on valuation support
The Shanghai and Shenzhen bourses have chalked up more than 1 trillion yuan (US$154.8 billion) in combined daily turnover for 38 straight days through Friday, according to exchange data. The current record of 43 days, straddling May and July 2015, helped double the benchmark index along the way.
The gush in trading underscores confidence among onshore money managers about the outlook for local shares, after Beijing’s months-long regulatory crackdown wiped out more than US$1 trillion of value of Chinese tech and education stocks, mostly those traded in Hong Kong and New York.
“Historically speaking, when the market turnovers are constantly above 1 trillion yuan, stocks tend to perform well in the medium and long term,” said Yan Xiang, an analyst at Guosen Securities.
The benchmark Shanghai Composite Index climbed last week to a level not seen since August 2015, while the benchmark in Shenzhen ended the week near its June 2015 peak.
Both overseas investors and leveraged traders are among those active buyers of China’s A shares. Foreign funds were net buyers of them in 14 of the past 15 trading days, according to Stock Connect’s northbound trading link. At the same time, the values of stocks purchased by leveraged traders have risen to a six-year high of 1.7 trillion yuan, according to China Securities Finance.