SHANGHAI (Reuters) – Chinese stocks rose to their highest levels in two years on Tuesday, continuing their strong rise as trade resumed after a week-long holiday and investors bet on stimulus to support the economy.
The leading CSI300 index rose 10% in early trading to reach its highest levels since mid-2022, and the Shanghai Composite Index rose 9.7% and reached its best levels since December 2021.
The Hang Seng Index in Hong Kong, which hit its highest level in two-and-a-half years on Monday, fell 2.8%. The yuan fell sharply to 7.0502 to the dollar and five-year bond futures fell to their lowest levels since July.
A press conference held by the National Development and Reform Commission at 0200 GMT was focused on getting more details on the stimulus pledges behind the market frenzy.
Before the break, China announced its most aggressive stimulus measures since the pandemic and the CSI300 rose 25% over five sessions. Trading value rose due to heavy buying that strained brokers and trading systems, and last Monday both the CSI300 Index and the Shanghai Composite Index posted their biggest gains since 2008.
The authorities lowered interest rates and hinted at financial support to support the suffering economy, according to Chinese standards.
Before the Golden Week holiday, hedge fund manager David Tepper told CNBC that the moves were encouraging enough that he would buy “everything” in China.
But the gains were so large that others are now urging caution.
“China’s weight in the MSCI Emerging Markets Index has risen from 24% in August to 30% now, and its continued outperformance could lead to a self-reinforcing ‘pain trade’ before the end of the year,” Bank of America analysts said in a note. Monday.
However, they said the ‘buy everything’ phase will end soon, as market momentum, fiscal support, earnings, US elections and other policy settings are all part of the outlook.
“Consumer stocks, real estate and brokerages could be profit-taking candidates…Large-cap Internet companies and high-yielding state-owned companies are our preferred exposure,” they said.
(Reporting by Reuters newsroom in Shanghai; Editing by Jamie Freed and Shri Navaratnam)