China’s key stock index climbs to 10-year high as investors chase higher returns

Mainland Chinese stocks rose on Monday, driving a key gauge to a decade high amid increasing signs that investors have been rotating out of bonds and bank deposits into equities in search of better returns.

The Shanghai Composite Index advanced 1.2 per cent to 3,740.50 at the break, a level not seen since August 19, 2015. The CSI 300 Index climbed 1.2 per cent, approaching the highest close since September last year.

The yield on China’s 10-year government bond increased 2.7 basis points to 1.775 per cent, a level seen four months ago. In Hong Kong, the Hang Seng Index rose 0.2 per cent to 25,321.11, while the Hang Seng Tech Index gained 1.3 per cent.

The increase in risk appetite on the mainland was reflected in Shanghai’s tech board, which surged 3.1 per cent, while a benchmark for start-ups in Shenzhen jumped 3.6 per cent. Telecoms and IT stocks were the best-performing industry groups on the broad-based CSI 300 Index.

“Bond yields and deposit rates are pretty low, while the wealth effect from the stock market continues,” said Amber Zhou, an analyst at Haitong International. “The rotation from bank deposits and bonds is expected to be ongoing.”

All eyes are on Federal Reserve chair Jerome Powell’s speech at the annual Jackson Hole symposium on Friday. Photo: Reuters

The stellar run in Chinese stocks has taken some investors by surprise, as official data last week showed that the growth momentum had broadly weakened in July. Regular state buying this year, meanwhile, has assured investors of limited downside risks in stocks, while the weak economic data has boosted hopes for more stimulus measures from Beijing.

South China Morning Post