Chinese stocks surged on Friday, on track to close their best week since the 2008 global financial crisis, driven by optimism over new government stimulus measures.
The CSI 300 Index, a key benchmark for China’s largest companies, climbed as much as 3.8%, marking an impressive 15% gain for the week.
The last time the index saw a bigger weekly gain was in November 2008.
The tech-heavy ChiNext Index also posted a record jump of 9.3%, while a gauge of Chinese stocks listed in Hong Kong surged 3.7%, marking its longest winning streak since 2018.
Meanwhile, Hong Kong’s Hang Seng Index gained 12.85% this week—its strongest performance since February 1998, according to FactSet data.
Investor FOMO ignites a buying frenzy
Investor enthusiasm is surging, spurred by hopes of further stimulus.
David Chao, a strategist at Invesco Asset Management, commented in a Bloomberg report, “FOMO is running high for investors as Chinese equities have rallied nearly 10% in just three days.”
Chao also predicts Chinese stocks could have “another 20% runway to go,” based on historical valuation trends.
The rapid increase in trading volume led to technical disruptions on the Shanghai Stock Exchange, where turnover reached 710 billion yuan ($101 billion) within the first hour of trading.
Brokerages reported delays in processing orders due to technical glitches. The exchange acknowledged the issue and is currently investigating the cause.
This trading frenzy is partly driven by investor fears of missing out on gains, as Chinese markets will close next week for the Golden Week holiday.
Friday’s trading volume was double that of earlier days this week, highlighting the intense buying pressure.
Morgan Stanley turns bullish on China
Investor confidence was bolstered earlier in the week by reports suggesting that China may issue 2 trillion yuan ($284.43 billion) in special sovereign bonds.
Additionally, new guidelines introduced by the country’s securities regulator aim to encourage companies to attract long-term investors, further lifting market sentiment.
Raymond Chen, a fund manager at ZiZhou Investment Asset Management, remarked, “This feels more like a market reversal than a mere rebound, and we may soon see fiscal measures rolled out as well. Many skeptics are being left behind.”
Morgan Stanley, along with other major financial institutions, has become increasingly bullish on China’s markets.
Strategist Laura Wang stated that the CSI 300 Index could see an additional 10% upside in the near term, signaling renewed confidence after months of market uncertainty.
Earlier this week, the Wall Street bank shifted its stance, no longer favoring onshore Chinese stocks over offshore counterparts due to the absence of state-backed buying.
The surge in Chinese stocks has also lifted other Asian markets with significant exposure to China, amplifying the region’s overall risk-on sentiment. As Chinese markets head into a holiday break, investors across Asia remain optimistic about further gains in the near term.
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