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Time of India

China's $11 trillion stock market is staging a steady resurgence

Bloomberg Live Events Bloomberg (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Chinese stocks have gained ground in recent months despite a lack of major catalysts, with ample domestic liquidity likely to sustain the households, flushed with record-high savings, are turning to equities for better returns as interest rates continue to drift lower. This shift in behavior has led to a surge in margin loans taken out to buy stocks, which climbed to the highest level since 2015 this week. The momentum is also seen in the monthly average turnover on onshore exchanges, which is on track for a third month of pushed up the benchmark CSI 300 Index 15% from its April low, following months of range-bound trading. While Beijing hasn't announced any major stimulus or finalized a trade deal with the US, markets have reacted positively to recent moves to curb excessive price wars and overcapacity in some sectors. These steps are seen by investors as a way to ease deflation and boost corporate earnings, which could provide further support to the market gains.'Funds with a high risk appetite are gradually increasing their allocations to stocks, against the backdrop of low interest rates, a lack of good investment options and a surplus of liquidity,' said Fu Zhifeng, chief investment officer at Shanghai Chengzhou Investment Management Co. 'The trend has just started building momentum and I don't see any signals for it to reverse anytime soon.'A gauge of onshore-listed small-cap stocks, long favored by individual investors, has surged to an eight-year high. The measure's 14-day relative strength index has remained above the overbought level of 70 for six-straight Securities Co. expects retail flows to accelerate in the second half of the year amid optimism over the government's five-year development plan. That may be supported by higher money growth locally. Liquidity supply in China rose 4.6% in June from a year ago, the largest rise in more than two years, latest data liquidity could offset any potential outflows as some investors take profit after the recent rally. 'There's little room for a major correction,' said Zhou Nan, founder and investment director of Shenzhen Long Hui Fund Management Co. He expects some selling pressure as the Shanghai Composite Index approaches 3,700, a nearly four-year gauge is about 0.2% away from the intraday high reached on Oct. 8 following a central bank policy blitz — a resistance level closely watched by local skeptics argue that the rally is unlikely to sustain without a meaningful recovery in earnings and economic prospects. The 'divergent performance among sectors suggests there is no systematic improvement in the market yet,' said Shen Meng, director at Beijing-based investment bank Chanson & said, improving trade ties with the US is spurring some risk-on sentiment. Strategists at Citigroup Inc. and Goldman Sachs Group Inc. have raised views on the country's stocks. Meanwhile, local insurance funds offer further support for equities.'This round of market rally, fueled by investor optimism, is far from over,' given that residents' willingness to invest in stocks has increased, China International Capital Corp. analysts including Li Qiusuo wrote in a Monday note.