The Chinese stock market is witnessing renewed investor interest with equities surging to the highest level in almost 10 years.
A review of the markets shows that on Monday, the Shanghai Composite Index ended up 0.85% to close at 3,728.03 points, after touching an intraday peak of 3,745.94, its highest since August 2015.
The rally helped push the total market capitalization of listed companies above 100 trillion yuan ($13.92 trillion) for the first time during the session.
Elsewhere, the Shenzhen Component Index rose 1.73% to finish at 11,835.57, while the ChiNext Index, which tracks China’s growth-focused firms, gained 2.84% to 2,606.2.
At the same time, over 4,000 stocks ended the day higher, led by brokerages, fintech companies, artificial intelligence (AI) hardware makers, and companies tied to rare-earths and new materials.
Unlike previous rallies, the latest surge has come with subdued volatility. In this case, the CSI 300’s 10-day historical volatility is near yearly lows, pointing to more measured investor positioning.
This has fueled hopes for a more sustainable bull market, in line with Beijing’s vision of a “slow bull” that supports household wealth and consumption.
Despite equities outperforming bonds in recent months, retail participation remains cautious. Chinese equity ETFs saw eight straight weeks of outflows through mid-August, even as the CSI 300 gained over 9%.
Drivers of Chinese stocks’ new momentum
Analysts suggest that households are gradually turning to stocks as falling interest rates erode savings returns, but buying enthusiasm has yet to reach speculative levels.
At the same time, the gains have been attributed to Beijing’s efforts to promote innovation-driven growth alongside measures to stabilize the capital market. Confidence has also been supported by the resilience of the Chinese economy, which expanded 5.3% in the first half of the year.
It’s worth noting that one of the last major rallies in Chinese stocks came in September 2024, driven by Beijing’s stimulus measures, including rate cuts and a $114 billion injection into equities.
At the time, markets were weighed down by a slowing economy, property woes, weak consumption, and rising geopolitical tensions.
Additional support came from the central bank’s swap program, which gave funds, insurers, and brokers easier access to financing for stock purchases. However, questions over sustainability persisted, as China’s market has seen several false starts in recent years.
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