Chinese stocks rose the most since 2015, heading into a bull market

(Bloomberg) — Chinese stocks extended one of the most remarkable comebacks in history, rising for a ninth straight day as government stimulus lured investors back into one of the world’s most battered markets.

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The CSI 300 index rose as much as 6.5 percent on Monday, the most since 2015, as traders rushed to buy stocks in the last session before the week-long holiday. The index, which has lost more than 45% of its value since its 2021 peak by mid-September, has since risen more than 20% – heading into a technical bull market. Its rally last week was its biggest since 2008.

The extended rally came after three of China’s biggest cities eased rules for homebuyers, while the central bank also moved to cut mortgage rates. The latest measures were among the key elements of a broad stimulus package released on Tuesday, which also included interest rate cuts, freeing up cash for banks as well as supporting liquidity for the stock market.

While the market has seen several similar-sized rallies in recent years only to hit new lows, investors are betting that the market’s current momentum can be sustainable at least in the short term. In a sign of the continuing frenzy, combined turnover on the Shanghai and Shenzhen stock exchanges topped one trillion yuan ($143 billion) in just over 30 minutes after trading began on Monday.

“The pace of the recovery clearly reflects how oversold the market has been,” said Charu Chanana, global markets strategist at Saxo Markets. “There is a clear belief that this time is different when it comes to the authorities’ support for the markets.”

Brokerages were among the top gainers, Citic Securities Co. reaching the 10% daily limit. Almost all CSI 300 component stocks were in the green.

The fear of missing out is also spreading offshore, with hedge funds selling US tech stocks and piling into mining and materials firms.

“I think the euphoric rally we saw last week in China’s markets could turn into something more tangible and sustainable as there appears to be a complete policy shift that could finally address the headwinds cycles over the past 3 years,” said David Chao, a strategist at Invesco Asset Management. “While there may still be debate about how these policy changes are being implemented and whether enough has been done, I believe a new direction has been charted.”

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–With help from Winnie Hsu.

(Updates with chart, price movements and new quotes)

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