Has the A share bull market returned?

Don’t judge a book by its cover. Or, don’t judge the market in its first few trading days. Just when the Hong Kong and China stock markets headed for their worst starts in a decade, guess what?

Investors are now optimistic and talking about the return of the big era of Chinese stocks in 2015.

On Monday, Chinese stocks posted their biggest single-day gains in more than three years after investors turned positive in the hope that the Sino-American trade talks would be productive and achieve concrete results.

Turnover in the Shanghai Composite Index, a barometer for A shares in China, went up 5.6% to 2,961, hit one trillion yuan, or about six times that of Hong Kong, indicating the bull market might return. The index continued to surge on Tuesday morning, but closed down 0.67% to 2,941 in the afternoon.

Four years ago, the State Council issued a guideline on the so-called “New Nine Opinions on Capital Markets and Banking” that excited the market about deregulation that included most notably A shares included in the MSCI.

In one of the shortest bull runs, there was market frenzy as the Shanghai Composite Index surged to 5,166 in June 2015, mainly driven by retail investors’ active buying since March 2015 as the index went up nearly 150% within a year.

However, the Chinese stock market quickly cooled as the index lost one-third of its value within the next six months and became one of the worst due to turbulence. A shares dipped into the bear market that hovered between 2,500 and 3,000 thereafter.

Now the question is whether this is the beginning of the bull market, a term that has not seen used since the trade war started last year.

It might. Hong Kong and Shanghai stock markets were the best performing global equity markets in January, and quite possibly this month as well.

This was thanks to the strong performance of traditional sectors such as financial companies, insurers and brokerages. Companies like China Life, whose performance was lackluster in the past three years, surged 7% on Monday, thanks to the upgrade by both the China International Capital Corporation and Morgan Stanley.

There were talks that retail investors who geared up for stock lending returns made more money in stock markets than in their jobs.

However, technology stocks which led the stock market in the past were relatively quiet, possibly because its American counterparts such as Apple and Amazon were still off from their peaks.

Tencent Holdings, the biggest stock in Hong Kong with a HK$3.27 trillion market cap, have been recently traded at about HK$340, still near 30% down from its peak of HK$475.7 in February 2018.

Geely Automobile is now traded at about HK$15.5, almost 50% down from its peak of HK$29.5 in November 2017. Investors who bought these shares at high prices may have to wait longer before they can cash out.

But it ain’t a bull market until Tencent and Geely move.