Chinese stocks are back, baby!
Shares on the mainland stock markets leapt 3% on Monday to their highest level in seven weeks on speculation that government would inject more liquidity into the economy.
It also didn’t hurt that Yi Gang, a deputy governor at the People’s Bank of China, said that the stock market correction “is almost over.”
The Shanghai Stock Exchange Composite Index jumped 3.3% to 3,288 on Monday. The Shenzhen Stock Exchange Composite Index leapt 4.2% to 1,887 and the Chinext Price Index, which tracks the small-stocks market, surged 4.5% to 2,317. The Hang Seng Index, the benchmark for Hong Kong stocks, gained 1.2% to 22,731.
While the Shanghai benchmark is at its highest points since Aug. 24, it’s still more than 30% off its June peak. Trading volume surged 60% over Friday to hit a one-month high
The main impetus for the surge was the central bank’s weekend announcement that it would let banks borrow money from the PBOC using high quality credit assets as collateral, according to Reuters.
“The policy may not immediately inject a lot of liquidity into the economy, but it has boosted expectations of monetary easing,” Wu Kan, head of equity trading at Shanghai-based investment firm Shanshan Finance, told Reuters.
In addition, at the end of the month, the government is expected to announce its 13th five-year economic plan. Investors anticipate it to contain a slew of stimulus and other growth measures.
“Given the weakness in the economy, the expectations are quite strong about a cut in interest rates and reserve-requirement ratios,” Zhang Haidong, chief strategist at Jinkuang Investment Management in Shanghai told Bloomberg he’s adding to his holdings. “The market is picking this up and the confidence is back.”