The indices are the youngest major stock markets entering the bull area. The S&P 500 has risen almost 40% since its low on March 23, while the German DAX has risen by more than 50% since March 18. The FTSE 100 in London has risen by more than 25% since March 23. Japanese Nikkei 225 and South Korean Kospi also rose more than 20% from their lows in March.
Chinese financials were some of the best performers in Hong Kong and Shanghai on Monday. The regulatory authorities in Beijing had previously relaxed the rules for margin financing, the practice of investing with borrowed funds.
“The signal from regulators is clear: they are pushing for the development of margin trading and short selling in China,”
Mainland Chinese markets are dominated by local investors. According to a May Securities Depository and Clearing Corporation survey, virtually all mainland equity markets – 99% of investors – are individuals.
The rally also comes as chatter about the return of a bull market to mainland China. Several state media said over the weekend that investors would return to stocks as part of a “bull comeback”, and suggested that this is exactly what China needs now, signaling further government support for the markets.
On Monday, the state-run China Securities Journal published an article that said, “Maintaining a healthy bull market is important to creating new opportunities.”
“In the post-Covid 19 world, the economy needs a healthy bull market more than ever,” the newspaper wrote.
Defense stocks included in the Shanghai Composite also rose sharply as tensions between the United States and China increased in the South China Sea. Two US Navy aircraft carriers arrived in the region for the first time in six years, a demonstration of military power from Washington that opposes China’s widespread claim to much of the contested region.