The indexes are the latest major stock markets to break into bull territory. The S&P 500 has rallied nearly 40% from its low on March 23, while Germany’s DAX has skyrocketed more than 50% since March 18. The FTSE 100 in London has risen more than 25% since March 23. Japan’s Nikkei 225 and South Korea’s Kospi are also up more than 20% from March lows.
Some of the best performers in Hong Kong and Shanghai on Monday were Chinese financial stocks. Regulators in Beijing had earlier loosened rules on margin financing, the practice of investing with borrowed funds.
“The signal from the regulators is clear: They are pushing for the development of margin trading and short selling business in China,” wrote Ma Ting Ting, an analyst for Chinese securities firm Guosheng Securities, in a research note Sunday. “We expect regulators to continue to boost stock market activity and try to guide even more funding from banks and insurers into the stock market.”
Markets in mainland China are dominated by local investors. Virtually all investors in mainland stock markets — 99% of the investor base — are individuals, according to a May survey taken by the China Securities Depository and Clearing Corporation.
The rally also comes as chatter about the return of a bull market heats up in mainland China. Several state media outlets said over the weekend that investors were rushing back to stocks as part of a “bull comeback” and suggested it is exactly what China needs now, signaling further government support for markets.
On Monday, the state-owned China Securities Journal published an article asserting that “cultivating a healthy bull market is important for creating new opportunities.”
“In the post Covid-19 world, the economy needs a healthy bull market more than ever,” the newspaper wrote.
Defense stocks included in the Shanghai Composite also rose sharply, as tensions rise between the United States and China in the South China Sea. Two US Navy aircraft carriers arrived in the region for the first time in six years, a show of military might from Washington as it pushes back against China’s sweeping claim to much of the contested region.