This week, bolstered by favorable policies, China's stock market experienced a significant surge, reigniting enthusiasm among domestic investors and boosting confidence among Wall Street investors across the ocean.
Many Wall Street investors believe that the wave of favorable policies illustrates the Chinese government's determination to support the economy. Most of them predict that the uptrend in Chinese stocks will continue.
The CSI 300 Index has climbed 15.7% this week, marking its strongest weekly performance since November 2008. The Hang Seng China Enterprises Index has risen for 11 consecutive days, setting its longest winning streak since 2018.
With the announcement of various supportive policies and ongoing market enthusiasm, recent comments from several major Wall Street banks have further fueled market fervor, leading more traders to believe in the sustainability of the current rebound.
Goldman Sachs has noted that investors are increasingly fearful of missing out on this Chinese market rally. They observe that many investors are beginning to conclude that this rebound might not fade away soon. Goldman Sachs also reported that their prime brokerage division achieved the largest single-day net purchase of Chinese stocks since March 2021 and the second-largest in the past decade this past Tuesday.
Barclays analysts suggested that China's stimulus measures could increase the country's GDP by a full percentage point over the next two years, interpreting this as a sign that China is now taking structural issues seriously.
Morgan Stanley predicts that the CSI 300 Index has an additional 10% upside potential.
According to a Bloomberg survey, 8 out of 12 Wall Street investors interviewed this week believe that this is a turning point for a long-term rebound in Chinese stocks.
Optimistic investors are now favoring Chinese tech stocks, whereas before this rally, Wall Street tended to prefer more defensive stocks, indicating a significant boost in confidence in the Chinese market.
The market has recognized China's determination to support the economy. Manish Bhargava, CEO of Singapore's Straits Investment Management, compared the recent statements from China's Politburo to Mario Draghi's "Whatever it takes" speech a decade ago, emphasizing China's strong resolve to support its economy.
Homin Lee, Senior Macro Strategist at Lombard Odier Singapore Ltd., stated that the Politburo's communication and the positive market response show that China has taken significant preemptive measures in fiscal policy and real estate sector stability. This proactive approach is likely to sustain investor interest in Chinese stocks.
