As bourses see record trading, experts see measures key to maintaining gains
With more signs recently of a bull run in the A-share market, including soaring indexes and stratospheric trading volumes, more economic stimulus policies as well as investors’ patience are important to further consolidate the upward trend of Chinese equities, experts said.
With the Chinese markets resuming trading after the National Day holiday, the benchmark Shanghai Composite Index gained 4.59 percent to close at 3,489.78 points on Oct 8, while the Shenzhen Component Index surged 9.17 percent. The technology-focused ChiNext in Shenzhen spiked 17.25 percent. Semiconductor, software development and securities companies led the day’s rally.
The combined trading value at the Shanghai and Shenzhen bourses stood at 3.45 trillion yuan ($490 billion) on Oct 8, surpassing the previous record of 2.6 trillion yuan on Sept 30, the last trading day before the holiday.
The A-share market’s rally came as officials of the National Development and Reform Commission, China’s top economic regulator, said the country will launch a batch of incremental policies to promote sustained economic recovery and development.
“China is confident of maintaining steady and healthy economic growth and achieving the full-year growth target,” Zheng Shanjie, head of the NDRC, said at a news conference on Oct 8, adding that more efforts will be made to strengthen the countercyclical adjustments for macroeconomic policies.
The incremental policies released in late September placed greater importance on improving the quality of economic growth, supporting the real economy, facilitating the sound development of market entities, and coordinating high-quality development and high-level security, he said.
Since Sept 24, the country’s top regulators have come up with supportive measures covering the financial sector, the property market, and support for the real economy, among others.
The measures will be used to spur more development potential and better achieve this year’s growth target, said Zheng.
Meanwhile, continued efforts will be made to boost the capital market, according to Zheng. More effective and comprehensive measures will be introduced to vigorously guide the inflow of long-term capital. Blockages preventing the smoother entry of social security funds, as well as insurance and wealth management funds, into the capital market should be removed.
Public companies will be supported in mergers and acquisitions as well as restructuring. The reform of mutual funds will be advanced steadily, and efforts will be made to promulgate measures to protect individual investors, said Zheng, noting that these policies will be rolled out at a faster pace.
Liu Gang, managing director of China International Capital Corp, said the measures announced in September had exceeded market expectations and rekindled investors’ passion, emphasizing the financial measures’ support for the stock market.
These have served as a driver for the recent bullish performance of the A-share market. But the market’s future performance will be determined by the pace and scale of successive policies, especially fiscal policies, Liu said.
China may adopt moderate fiscal stimulus of about 1.5 to 2 trillion yuan in the short term, which is a reasonable level, said Wang Tao, chief China economist at UBS Investment Bank.
Chen Guo, chief strategist at China Securities, said the Chinese stock market’s recent bullish performance is supported by the revaluation of Chinese assets and recovered confidence.
But a well-grounded overall bull run still needs time, especially the further improvement of economic fundamentals, and investors should have patience for the medium term, Guo said.
