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The Hang Seng China Enterprises Index jumped 2.5% overnight, with major banks up 3% to 6%. China Minsheng Bank, Postal Savings Bank, and China Construction Bank all rose by around 6%, and Industrial Commercial Bank of China, China Citic Bank, and Bank of Communications rose by about 4%.

Global appetite for large-cap Chinese stocks was dampened by fears of a Chinese financial crisis. Now that China has shown that it can de-lever the financial system and maintain strong growth at the same time, investors are scrambling to add Chinese stocks to portfolios before the MSCI indices expand to include China later this year. With the HSCEI up 17.2% year to date, any global portfolio that did not include China would have underperformed.

Goldman Sachs reported last September that global and emerging market fund managers are still underweight in China against their broader indices. Now they are playing catch-up.

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