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

Short squeeze
Glossary

Short squeeze

When a large number of short sellers target the same stock, the price can rise in a self-perpetuating circle known as a 'short squeeze'.
6 Dec 2021
Cost/income ratio
Glossary

Cost/income ratio

The cost-to-income ratio is a key financial measure, particularly important in valuing banks...
6 Dec 2021
Has the “jam tomorrow” bubble popped already?
Stockmarkets

Has the “jam tomorrow” bubble popped already?

Fund managers have had a good year so far. John Stepek looks at what to expect from markets until year end.
6 Dec 2021
Three stocks that should profit from the dash for digital growth
Share tips

Three stocks that should profit from the dash for digital growth

Professional investor Christopher Versace of the Digital Infrastructure and Connectivity UCITS ETF picks three digital growth stocks to buy now.
6 Dec 2021

Most Popular

Bubbles grow in global property markets as house prices continue to rise
Property

Bubbles grow in global property markets as house prices continue to rise

House prices grew by 6% in the year to mid-2021 in 25 global cities, with the German property market in particular showing signs of overheating.
3 Dec 2021
Investing in time
Sponsored

Investing in time

SPONSORED CONTENT – Watch collecting can be addictive and expensive, but it can also be a very sound investment strategy
3 Dec 2021
Three safe bets on the growing online gambling sector
Share tips

Three safe bets on the growing online gambling sector

Professional investor Aaron Fischer, creator of the Fischer Sports Betting and iGaming ETF, picks three of his favourite online gambling stocks.
29 Nov 2021