SHANGHAI (Reuters) -Chinese shares rose to their highest level in two years on Tuesday, further fueling a blistering rally as trading resumed after a weeklong holiday and investors bet on stimulus measures to support the economy.
The blue-chip CSI300 rose 10% in early trading to its highest level since mid-2022 and the Shanghai Composite rose 9.7% to hit its best levels since December 2021.
Hong Kong’s Hang Seng, which hit a 2.5-year high on Monday, fell 2.8%. The yuan fell sharply to 7.0502 per dollar and five-year bond futures fell to the lowest level since July.
A National Development and Reform Commission press conference called for 0200 GMT is eyeing further details of the stimulus pledges behind the market frenzy.
Before the break, China announced its most aggressive stimulus measures since the pandemic and the CSI300 gained 25% in five sessions. Turnover soared as brokers and trading systems came under intense pressure, and last Monday the CSI300 and the Shanghai Composite both posted their biggest gains since 2008.
Authorities have cut interest rates and hinted at budget support to support an economy that is, by Chinese standards, ailing.
Ahead of the Golden Week holiday season, hedge fund manager David Tepper said on CNBC that the moves were encouraging enough that he would buy “all” on China.
But the gains are so great that others are now calling for caution.
“China’s weighting in the MSCI EM Index has risen from 24% in August to 30% now, and its continued outperformance could trigger a self-reinforcing pain trade before the end of the year,” analysts at the Bank of America in a note on China. Monday.
However, they said the ‘buy everything’ phase will soon be over, with market momentum, budget support, profits, the US election and further policy adjustments all part of the outlook.
“Consumer, real estate (and) broker stocks could be candidates for profit taking… big cap internet and high-yield state-owned companies are our preference,” they said.
(Reporting by Reuters newsroom in Shanghai; Editing by Jamie Freed & Shri Navaratnam)
