Chinese stocks rise again as investors push back into the market
Just seven days ago we wrote about the surging Chinese stock market. Since then, there has been endless talk of bubbles and corrections for the mainland markets in the media. That talk got much louder on Tuesday as stocks fell dramatically. Since then however, the coming bust has failed to materialize and after brisk trading yesterday lead the market up, Chinese stocks today have recovered all of their losses from two days ago.
On Tuesday, the Shanghai Composite Index, which tracks yuan-backed A shares and hard-currency-backed B shares, fell to 3899.178, down nearly 173 points from its May 10 peak. The Shanghai Shenzhen Composite Index, which tracks the entirety of the mainland stocks fell to its lowest point in since May 1, closing at 3604.636 on May 15 (down nearly 165 points from its month high of 3734.42).
The day saw stocks fall across Asia as Japanese machinery orders unexpectedly fell and metal prices slumped. Lead by blue chips Sony and BHP, shares across the region dropped with the only the Thai and Philippine stock exchanges posting gains.
By Wednesday however, share prices had begun to rise again and the rebound lead mainland indexes up, the Shanghai Composite closing at 3986.043, the Shanghai Shenzhen 300 closing at 3700.287.
At noon today, the Shanghai Composite Index stood at 4023.84, while the Shanghai Shenzhen 300 stood at 3757.65. The correction that everyone seems to be waiting for just refuses to materialize. As Jeremy Gordon writes in China Business Services:
I guess rising stock prices are good news, but one has to wonder at what is going on in China at the moment. I half expected (following my last post on this issue) a “bust” to appear in the title of this post but, despite more government warnings over the weekend, the markets are bubbling noisily away.
Meanwhile the Bank of Communications (which recently had its status upgraded) listed in Shanghai – immediately gaining 79%. Not bad, even for a Chinese bank! According to the FT:
“As a result of the first-day jump, the company’s Shanghai-listed shares are now trading at a premium of around 70 per cent to its shares traded in Hong Kong, which also jumped 4 per cent in early trading. Although all the companies listed in both markets are trading at a premium in Shanghai, the average is around 45 per cent.”
We’ve been here before of course, and the bubble for now it seems will keep bubbling. But it could all get very bloody if the warnings of industry analysts and Zhou Xiaochuan, governor of the central bank come true.
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