China Stocks’ Trillion-Dollar Rally Pushes Another Index Toward Bull Market

(Bloomberg) -- A $1 trillion rally in Chinese stocks has pushed two more gauges into bull markets.

The CSI 300 Index surged 6 percent Monday and the Shanghai Composite Index climbed 5.6 percent, extending their gains from a Jan. 3 low to more than 20 percent, the level that typically denotes a bull market after a drop of the same size. The ChiNext Index of small caps and technology stocks, which entered a bull market Friday, rose a further 5.5 percent. Turnover on Chinese exchanges rose beyond 1 trillion yuan to the most since 2015.

Investors are embracing risk as the U.S. and China appear to be making progress on trade talks, while the lifting on some trading curbs by the new head of the securities watchdog has added to the enthusiasm. A measure of margin debt in China's stock markets is rising after hitting its lowest level in more than four years on Feb. 1.

“Even if stocks retreat in the short term, there's still room for further gains as leverage is still way below the peak despite the increase,” said Shen Zhengyang, a Shanghai-based strategist with Northeast Securities Co. “Investors also have to bear in mind that economic fundamentals are still bad, so in order to avoid getting burned in a likely more volatile market, it's key to always remain wary.”

The CSI 300 Index is still 15 percent below its 2018 peak.

Read the latest on the China-U.S. trade negotiations here

The change in investor sentiment has also boosted the yuan, which is the best performer among major currencies since Feb. 1, strengthening 0.8 percent against the dollar. The currency was up 0.34 percent at 6.6928 as of 3:14 p.m. in Shanghai.

Chinese brokerage stocks were especially hot, after President Xi Jinping said in a Politburo meeting that China will deepen reform in the finance sector and further open the industry. Huatai Securities Co. was among the brokerages to climb by the 10 percent daily limit in Shanghai, closing at its highest since June 2015.

Some other stories of note on Monday:

• All the Ways China Influences Yuan, and How to Monitor Them
• China's Stock Surge Puts World-Beating Bond Rally in Shade
• China's Xi Vows to Step Up Anti-Graft Campaign in Finance Sector
• Techtronic Jumps Most This Year on Surprise Hang Seng Inclusion
• Surprise China Default Triggers a New Worry for Investors
• Ping An Is Said to Plan IPO of Fintech Unit at $8 Billion Value
• What Analysts Are Saying About Equities: China Research Digest

--With assistance from Matt Turner.

To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at twang234@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann, Will Davies

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With assistance from Bloomberg