It’s fiction, but you can imagine that an uncontrolled dragon is capable of wreaking the most fearsome chaos. The screen has left great examples of this, such as the fight against the dragon Smaug in the hobbit or the recent dragon war of The House of the Dragon, the prequel to Game of Thrones. And that’s what China is trying to do: contain the dragon of its economy. And the solution involves a recovery plan that the country’s government recently approved and which is already producing its effects. Investors are returning in force to the Asian giant and the Chinese stock market is experiencing its best session in 16 years this Monday.
Concretely, the CSI 300 recorded an increase of 8.5% on this first day of the week. It had not increased so sharply in one day since September 2008while in a single session, it advanced by a little more than 9%. As collected from BloombergIt was a historic day for Chinese stocks as trading volume reached an all-time high and interest was so high that requests from brokers collapsed and requests to open trading accounts rose sharply. , according to local media.
With the exception of two companies that ended the day with a zero score, the remaining 298 companies included in the index closed Monday’s session with gains and as many as 20 companies posted gains of 20% or more during the single session. During the year, as many as eight companies revalued more than 60%, the top two including Cambricon, a technology company, and Zhongji Innoligh, a company teleco) which achieved increases during the year of over 110% and 90% respectively.
The reasons for this progress? On September 24, the Chinese government announced a recovery plan to try to revive the economy, whose growth is slowing faster than expected, even calling into question the annual growth objective of 5%. This aid comes to try to revive sectors such as banking, real estate and the stock market itself.. The country’s Banco Popular also announced measures such as lowering interest rates on existing mortgages or reducing borrowing costs, among others. “These measures, taken in one fell swoop, represent an unprecedented package of powerful monetary easing, underscoring the urgency the government feels to revive growth. These are huge steps by Chinese standards: generally speaking, In recent years, the People’s Bank of China has changed its It is very rare for the central bank to have used multiple tools in the same month, let alone the same day,” says Chang Shu, chief economist for Asia. has Bloomberg Economics.
Added to all this is the news this Monday that three of China’s biggest cities to ease rules for home buyers. Shanghai and Shenzhen will reduce minimum entry fees for first and second home purchases to 15% and 20% respectively, seeking to revive demand in a weak real estate sector.
This situation led the CSI 300 to increase for nine consecutive sessions without interruption, in what is its longest bullish streak in its history, although the largest gains began to arrive from the 24th, the day of the announcement of the recovery plan (Since that day, the day that gained the least was 1.6% and the rest has evolved around 4% daily). In fact, it started to rise again after reaching the lowest levels of the year on September 13 and placing its price at even lower than Covid levels in January 2019. Since then, the Chinese selective has rebounded around 21%, once again entering a bull market. (the one you enter when you increase more than 20% from the minimum levels of the year) and closes September as the month in which it has advanced the most since December 2014.
SO, In just two weeks, the CSI 300 went from a loss of almost 8% of its value over the year to a gain of just over 17% in 2024. A dazzling career that has placed him at the level of the big heavyweights of Wall Street, where the S&P 500 and the Nasdaq 100 are up 20% and 19% respectively, and are just behind the Ibex 35, the most selective index bullish. in the Old Continent world, with an increase of 18%.
But if you mean bullish, the one that tops all is the Hong Kong index. The Hang Seng has appreciated by almost 24% over the current year and its price is reaching February 2023 levels. Like the CSI 300, most of its victory is due to the behavior it has exhibited in September. Of this 24%, only 16 points were achieved in September, which was its most bullish month since November 2022.
The index continues to be one of the cheapest
Despite the unstoppable rise that the CSI 300 has experienced, the expected gains for the index as a whole continue to be among the cheapest among the major global indices. Concretely, those expected for 2024 are purchased at a PER (time the profit is included in the share price) of 14.7 times and falls to 13 times for 2025. These figures contrast with the high multiples of the north-west market. American (23.7 times the S&P 500) and only the Ibex 35 is bought less expensive (11.4 times).
