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The bull market for Chinese stocks is back

The Shanghai Composite (SHCOMP) led the markets in the region and closed 5.7%, the best percentage daily gain since July 2015. It is now more than 20% above the recent lows of late March – the traditional benchmark for a bull market. The Hang Seng (HSI) closed 3.8% and also entered a bull market.

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,”

; Ma Ting Ting, analyst of Chinese securities firm Guosheng Securities, wrote in a research note on Sunday. “We expect regulators to further boost stock market activity and try to channel even more financial resources from banks and insurers to the stock market.”

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.

Other major markets around the world took part in the rally despite ongoing concerns about the coronavirus pandemic. The Nikkei 225 (N225) rose 1.8% during the Kospi (KOSPI) was 1.7% higher. The FTSE 100 (UKX) rose 2.2% during the DAX (DAX) and CAC 40 (CAC40) also won over 2%.
Dow (INDU) Futures rose 350 points, or 1.4%. Futures for S&P 500 (SPX) and the Nasdaq (COMP) increased by 1.1% and 1.2%, respectively.
The big developments in corona viruses still made some investors pause. Jeffrey Halley, senior market analyst for the Asia-Pacific region at Oanda, found that the Australian S & P / ASX 200 was the only major index to trade lower in Asia. It decreased by 0.4% when the state of Victoria closed its borders and thousands of people after a sharp increase in coronavirus cases.

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