Chinese stocks close at highest level since 2008
China’s stock market closed at its highest level since the global financial crisis, capping a world-beating rally fuelled in part by international investors seeking shelter from the coronavirus pandemic.
The CSI 300 index of big Shanghai and Shenzhen-listed stocks closed 1.9 per cent higher on Tuesday at 5,368 points.
The widespread perception among the country’s retail investors that stocks are cheap, together with expectations of support from Beijing, is helping to drive onshore buying, said Ronald Wan, chief executive at Partners Capital.
“People are investing in the stock market because they don’t have another alternative at this point in time and people’s confidence is bouncing back,” Mr Wan said.
Chinese shares have rallied more than 50 per cent from a low point set during a Covid-19-sparked sell-off in March. Lured by the country’s strong economic recovery from the pandemic, global investors ploughed more than Rmb1tn ($150bn) into the country’s onshore stock and bond markets last year.
The latest surge has taken the equity benchmark to its highest closing level since 2008, surpassing a stock market bubble in June 2015 that gave way to a historic 40 per cent decline in the space of months.
However, few expect a similar pullback now. Even after the rebound of 2020, shares in Shanghai and Shenzhen are still not as richly valued as they were during the boom five years ago. The price-to-earnings ratio for the CSI 300, a common measure of valuation, stands at 20.6 compared with a peak of 22.5 in 2015.
Leverage in China’s stock market, which helped drive the previous rally until regulators began clamping down, is also substantially lower than five years ago. Total outstanding margin loans stand at about Rmb1.5tn, compared with more than Rmb2.2tn in June 2015.
But Mr Wan added that while China’s so-called A-share market was likely to continue its rally through the first half of 2021, onshore equities’ draw for both domestic and international investors could fade as vaccines are rolled out in Europe and the US.
“If these vaccines work, other countries’ economies will bounce back and we’ll see some sort of diversification from investors [away from China],” he said. “At that point the A-share market may see an adjustment.”