The whole worth of China’s inventory market has climbed to a report excessive of greater than $10tn, because the nation’s accelerating financial restoration propelled it previous the earlier peak hit throughout an equities bubble 5 years in the past.

The market capitalisation of all shares listed in Shanghai and Shenzhen hit $10.08tn in keeping with Bloomberg information compiled on Wednesday based mostly on the day before today’s shut. The benchmark CSI 300 slipped 0.6 per cent on Wednesday.

That’s above the $10.05tn pinnacle hit in June 2015 instantly previous to a historic rout sparked by a crackdown on leveraged buying and selling, which resulted within the Chinese language market plunging by half.

The CSI 300 has rallied by about 17 per cent this yr, in comparison with 9 per cent for Wall Avenue’s S&P 500. The Shanghai and Shenzhen markets have sucked in about $26.5bn in world funds via inventory join programmes with Hong Kong, partly attributable to optimism over the Chinese language financial system’s restoration from coronavirus, which has outpaced that of the US.

“Traders are in search of progress and discovering it very scarce elsewhere — in order that they see an unlimited quantity of alternative in China,” mentioned Craig Coben, co-head of Asia Pacific world capital markets at Financial institution of America.

On Tuesday, official information confirmed China’s imports for September hit a record dollar amount on the again of urge for food for commodities and semiconductors. The renminbi has additionally strengthened in opposition to the greenback in current weeks on expectations of a Joe Biden win in November’s US presidential election and optimism over a reset in relations between the 2 superpowers.

Line chart of Market capitalisation (US$tn) showing China's stock market value climbs past 2015 high

Analysts mentioned that, regardless of this yr’s rally, Chinese language shares stay much less frothy than through the bubble of 2015, when retail merchants drove valuations to eye-watering heights.

“In comparison with 5 years in the past there have been some main modifications,” mentioned Bruce Pang, head of macro and technique analysis at funding financial institution China Renaissance. Mr Pang mentioned the usage of margin lending to purchase equities was far much less prevalent now than in 2015, when Chinese language markets rallied by greater than 100 per cent earlier than collapsing share costs triggered waves of compelled promoting.

Broadly, valuations for the Chinese language inventory market additionally seem extra cheap presently. The CSI 300 trades at lower than 19 occasions its previous 12 months’ earnings, in comparison with greater than 40 on the index’s 2015 peak.

Whereas retail buyers stay a robust drive in China’s onshore inventory market, Mr Pang added that the higher presence of institutional and overseas buyers had helped scale back volatility. “Threat elements are literally controllable and manageable for the authorities,” he mentioned.

Bar chart of Holdings of free-floating Chinese shares showing Institutional investors' role in China's equity market  grows

Institutional buyers held greater than 70 per cent of the free float of all Chinese language shares as of the tip of June, China Renaissance estimated, whereas overseas buyers owned roughly 5 per cent. Retail buyers held lower than 1 / 4, down from about half 5 years in the past.

China’s inventory market is the second largest on the earth, though it stays far smaller than the US’s practically $39tn.


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