The CHINA 50 index is squeezing higher against recent resistance and is also testing the late-2024 highs. That could mark an important test for the medium-term market trend.
CHINA 50 – Daily Chart
The Shanghai Stock Exchange Composite Index jumped by 0.9% to close at 3,728 on Monday, which marked the strongest finish since August 2015. The index has returned 20% since the tariff bottom in April-May. Shares were boosted by an extension of the U.S. and China trade negotiations, with hopes that a deal can be found.
“We’re confident that this rally has legs,” said Wang Huan, a fund manager at Shanghai Zige Investment Management.
There is still hope among investors that the government will provide further stimulus measures. Chinese stocks have been boosted by investors shifting from fixed income, as analysts reduce their monetary easing predictions.
The recovery in China’s stock market has created a trading boom with turnover on mainland exchanges hitting more than 2.7 trillion yuan ($376 billion) on Monday. According to Bloomberg, that was the second highest turnover ever. Chinese investors are also piling into Hong Kong-listed stocks with a record HK$35.9 billion ($4.6 billion) purchased on Friday.
However, a concerning report said that the world’s largest hedge fund, Bridgewater Associates, had now dumped all of its holdings in Chinese companies in the second quarter. A regulatory report said that they had sold companies including Alibaba Group, JD.com and PDD Holdings. Other stakes were closed in Baidu, EV maker Nio, and Trip.com.
The company had been favouring Chinese stocks, but may have reconsidered after the recent tariff exchanges. The hedge fund went back to domestic stocks with buys in Nvidia, Microsoft and Alphabet.
