China’s bulls stampede as recovery gathers strength

China's benchmark CSI 300 stockmarket index has gained 12% so far this year and is up by 32% since 23 March as the country's industrial and consumer recovery contnues.

China’s recovery is gathering strength, say Finbarr Bermingham and Amanda Lee in the South China Morning Post. Industrial production continues to lead the way, rising by 5.6% in August on a year before. There are also signs of a consumer rebound: retail sales advanced by 0.5% on the year in August, the first growth recorded this year. 

China is the only big economy the International Monetary Fund thinks will expand this year. The encouraging economic backdrop means the bulls are out in force. The benchmark CSI 300 stock market index has gained 12% so far this year and is up by 32% since 23 March. 

The rally has brought plenty of signs of excess. Shares on the Star market, a technology-focused equivalent to America’s Nasdaq, have been trading at “huge premiums” to “near-identical” stocks listed in Hong Kong, says Xie Yu in The Wall Street Journal. The fact that local investors are willing to pay up to five times as much as offshore buyers for the same assets suggests a speculative frenzy. However, regulators intervened to cool excesses over the summer, with the CSI 300 now off 3% from a mid-July high. The Star market froth makes more sense than you think, says Shuli Ren on Bloomberg. Too often foreign investors think China is “just another growing emerging market” with a rising middle class. 

That prompts them to buy into consumer stocks such as Luckin Coffee (which later turned out to be a fraud). Locals, by contrast, know that nothing is as solid as a sector that has almost unconditional government backing: pricey technology firms. Chinese markets are driven by retail investors and can provide a wild ride. But authorities tend to step in if they fall too far. In a lousy year for the global economy, China’s markets are a rare bright spot. 

Recommended

Is now a good time to buy a house?
Property

Is now a good time to buy a house?

Is now a good time to buy a house? That’s something many people might be asking as house prices, and mortgage rates, begin to decline
30 Jan 2023
Government consults on small pensions pots - here’s what to do if you have several small pension pots
Pensions

Government consults on small pensions pots - here’s what to do if you have several small pension pots

The Department for Work and Pensions has started consulting on helping workers who hold a number of small pension pots. We look at how the government …
30 Jan 2023
Self-assessment tax returns: what you need to know about getting your tax bill right
Income tax

Self-assessment tax returns: what you need to know about getting your tax bill right

Understanding how self assessment works can help you ensure you pay the right amount of tax, as well as avoid penalties for missing the deadline.
30 Jan 2023
Zoopla: house prices stalled at the end of 2022
House prices

Zoopla: house prices stalled at the end of 2022

The property market looks primed for a slow burn start, and buyers are turning towards flats instead of homes as they prioritise affordability, latest…
30 Jan 2023

Most Popular

Share tips of the week - 27 January 2023
Investments

Share tips of the week - 27 January 2023

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
27 Jan 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced on 2 February – we look at what to expect.
26 Jan 2023