Chinese domestic equities are worth more than $10 trillion for the first time since 2015, when a record crash erased half the market’s value in months and saddled millions of investors with losses.
The world’s second-largest stock market has added $3.3 trillion since a low in March, helped by Beijing’s policies to encourage trading, a flurry of new listings that arrived with eased rules and the strengthening yuan. Stocks have been close to the $10 trillion milestone since July, when China’s government acted to tame a speculative rally that had suddenly pushed a gauge of large caps near a 12-year high.
The country’s total market capitalisation is now $10.04 trillion and just shy of the all-time high, according to data compiled by Bloomberg as of Monday.
“It’s a meaningful number, especially coming after a pause in the stock rally,” said Hao Hong, chief strategist for Bocom International in Hong Kong. “It’s possible China’s market value can expand faster now that market reforms like the registration-based IPO system are in place.”
The US has the world’s most valuable equities market at $38.3 trillion. Japan is No. 3 at $6.2 trillion, and Hong Kong’s is worth $5.9 trillion. The UK has the world’s fifth biggest market at $2.8 trillion.
Chinese shares rallied after a long holiday break on optimism the government will introduce reforms to turn the region around Shenzhen into a global technology hub and that the ruling Communist Party will introduce policies to stimulate demand when it holds a major meeting later this month. Equities surged over the summer as margin debt climbed at the fastest pace since 2015 and turnover soared.
The CSI 300 Index of key stocks listed in Shanghai and Shenzhen rose 0.3 per cent at the close on Tuesday. It’s gain of 18 per cent this year tops the world’s major benchmarks.
China has added a new stock venue since 2015, with the Nasdaq-style Star market launching in Shanghai in July last year. Regulators waived rules on valuations and debut-day price limits for shares on the board. In August this year, a batch of 18 firms traded for the first time on the ChiNext Index under so-called registration-based initial public offerings, surging by an average 212 per cent by the close.
Meanwhile, Chinese internet stocks will keep outperforming their US counterparts in the months ahead as regulatory challenges to America’s technology giants mount in Washington and Brussels, according to some investors.
Their reasoning includes expectations that weakening the U.S. megacaps will help bolster the relative attractiveness of Chinese technology companies, which are continuing to invest in areas of growth. Meantime, the growing uncertainty over prospects for the US sector could send buyers to their cheaper Chinese peers which are still being championed by the government in Beijing.