China’s bull run tests regulators as Beijing aims to guide US$12 trillion stock market

Stunning gains in Chinese stocks are testing regulators’ ability to manage the ascent, as Beijing seeks to fulfil its long-standing goal of positioning the nation’s US$12 trillion equity market as a steady source of household income that can support consumer spending and economic growth.

As the property market remains in the doldrums, eroding the wealth of Chinese investors who are sitting on a record 160 trillion yuan (US$22.5 trillion) in bank savings, the stock market has become a focus of President Xi Jinping’s drive to build a financial superpower.

Wild booms and busts over the past two decades may prompt Beijing to review how it could guide a measured but sustainable bull market, akin to what has been achieved in India, Japan and the US.

Steady gains from the stock market could serve to both move some household wealth away from the property market – which accounts for 60 per cent of Chinese families’ assets – and help boost slumping consumption. Financial regulators may be pleased to see that the nonstop gains have moderated after a pullback last week, reducing the risk of retail investors engaging in volatility-inducing pump-and-dump moves.

China’s key stock benchmarks slumped more than 2 per cent on September 4, their biggest stumble in the current bull run. Photo: CFOTO/Future Publishing via Getty Images

“We are in transition from the one-way gain to a slow bull [market],” said Hao Yifan, an analyst at Hwabao Securities in Shanghai. “Market volatility may increase, but sentiment still remains and the uptrend isn’t over yet.”

South China Morning Post