China's stock market embraces surge ahead of National Day holiday

BEIJING -- The recent rally in China's stock markets, fueled by a series of stimulus measures, has significantly ignited investors' enthusiasm and bolstered market confidence in the country's economic recovery.

The benchmark Shanghai Composite Index surged 8.03 percent to close at 3,335.44 points on Monday, while the Shenzhen Component Index soared 10.68 percent to reach 10,530.85 points at the close.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, skyrocketed 15.52 percent to close at 2,178.04 points.

Monday is the last trading day before the week-long National Day holiday. The Chinese stock markets will be closed Tuesday through Oct 7.

"Due to a rapid introduction of stimulus policies, with some clearly exceeding market expectations, the stock market has begun to show a noticeable upturn, attracting a broad base of investors," said Lou Feipeng, a researcher at China Postal Savings Bank.

PROPERTY STOCK SURGE

The combined turnover of the Shanghai and Shenzhen bourses surpassed 2.5 trillion yuan (about $356.76 billion) on Monday, reaching a historic high.

Stock prices for property firms surged following an announcement by China's central bank on Sunday evening, asking commercial banks to reduce interest rates on existing mortgages by Oct 31. This directive is part of an extensive set of measures aimed at shoring up the country's struggling property sector.

Also on Sunday, the major southern city of Guangzhou announced the removal of all home purchase restrictions, while Shanghai and Shenzhen have also taken steps to relax their buying curbs.

Lifted by the news, property shares rose across the board. Greenland Holdings, a leading property developer, surged by 10 percent to 2.08 yuan per share. Gemdale, another big developer, bounced 10 percent to close at 5.47 yuan.

BROADER STIMULUS EFFORTS

Last week, the government's financial authorities announced a broader-than-expected policy package to galvanize the economy's rebound.

These policy measures include reducing the reserve requirement ratio for banks and mortgage rates for existing homes, among others.

In a move especially beneficial for stocks, the central bank introduced two fresh tools to boost the capital market, one of which includes a swap program allowing funds, insurers and brokers easier access to funding in order to buy stocks.

Adding to efforts to firm up economic operation, the Political Bureau of the Communist Party of China Central Committee held a meeting on Thursday, which called for efforts to "boost the capital market and vigorously guide medium and long-term funds into the capital market."

"With the slew of policies taking effect, we believe the capital market has a solid foundation for more transactions and room for valuation increases," said Wang Yifeng, an analyst at Everbright Securities.

BULLISH SENTIMENT

This series of measures has stimulated the buying sentiment of investors both at home and abroad.

Billionaire David Tepper, widely considered as one of the most successful hedge-fund managers, said last week that he was going all-in on China after the announcement of these stimulus measures.

Bullish on all aspects of China, Tepper said that he will buy "everything" in China, including ETFs and futures.

The continued net purchases of Chinese stocks by overseas capital are not only a positive endorsement of China's economic prospects but also a rational choice in the process of seeking high-quality investment opportunities.

This trend also sends a positive signal to domestic investors, indicating the constantly growing appeal of Chinese stocks in the global capital market.

As people rush to open their investment accounts, many brokers will have to work overtime during the National Day holiday, according to industry insiders.

"Capital is pouring into the market, there is a fear of missing out on this wave of the trend," said Zhou Maohua, a macroeconomic researcher at Everbright Bank.