Chinese stock valuations have hit a record high, topping the peak reached during its disastrous equity bubble five years ago.
The total value of the country’s listed companies hit $10.08 trillion on Wednesday, according to a Bloomberg measure, amid widespread confidence in the strength of a Chinese economic rebound.
Despite being the initial epicentre of the Covid-19 pandemic, China’s apparently effective containment efforts meant that it quickly recovered from disruption in the first quarter. Its economy was rebounding even as many countries in the West initially entered lockdown.
Polls pointing towards a solid victory for Joe Biden in next month’s US presidential election have also contributed to rising sentiment. A victory for the Democratic Party candidate is expected to presage something of a reset in relations between Beijing and Washington after four years of combative trade policy under Donald Trump.
Pascal Blanqué, chief investment officer at Amundi, Europe’s biggest asset manager, said China’s “first-in, first-out” pandemic experience meant its equity markets were likely to continue growth, diverging from the rest of the world.
“With still-high uncertainty around the evolution of the cycle in Europe and in the US, China is emerging as the engine of growth,” he said.
But strategists at Japanese bank Nomura cautioned that China’s recovery may turn tepid as the year drags on, saying: “Beijing appears reluctant to launch a new round of easing for property markets, some social distancing measures within China are likely to be extended... and rising US-China tensions could hit China’s exports and related manufacturing investment”.
Wednesday’s total stock valuation beats the $10.05 trillion peak reached in 2015, before a brutal sell-off that began when the authorities pulled the plug on excessive bank lending.
This time, the record appears to be built on firmer ground: the CSI 300’s forward price-to-earnings ratio is less than half its 2015 level, and the proportion of shares held by institutional investors is higher at around 70pc, compared to roughly 50pc five years ago.