The rise in Chinese stocks resembles the bubble of 2015. What is different

BEIJING – The meteoric rise in Chinese stocks so far looks different from the market bubble in 2015, analysts said.

Mainland Chinese mainland stock indices rose more than 8% on Monday, extending their winning streak on stimulus hopes. Trading volume on the Shanghai and Shenzhen Stock Exchanges reached 2.59 trillion yuan (368.78 billion US dollars), exceeding the highest level of 2.37 trillion yuan on May 28, 2015, according to Wind Information.

Over a six-month period from 2014 to 2015, the value of China's stock market doubled, while leverage rose, Aaron Costello, regional head for Asia at Cambridge Associates, noted on Monday.

He said that this time the market has not risen as much, while the leverage is lower. “We are not in the danger zone yet.”

Stock market leverage in both percentage and value terms was much higher in 2015 than data released Monday showed, according to Wind Information.

The Shanghai Composite Index in June 2015 rose above 5,100 points, a level it has never recovered since the market slump later that summer. MSCI was late that year in adding mainland Chinese stocks to its globally tracked emerging markets index. Sentiment was also affected by Beijing's wavering policy on a crackdown on borrowed money trading and a sudden devaluation of the currency. Chinese yuan Against the US dollar.

This year, the yuan is trading stronger against the dollar, while foreign institutions' allocation to Chinese stocks has fallen to multi-year lows.

The Shanghai Composite Index closed at 3,336.5 on Monday, before mainland stock exchanges closed for a week-long holiday to commemorate the 75th anniversary of the People's Republic of China. Trading is scheduled to resume on October 8.

In the run-up to the 2015 market rebound, Chinese state media did just that It encouraged investment in the stock marketWhile looser rules allowed people to buy stocks with borrowed money. Beijing has long sought to build up its domestic stock market, which is nearly 30 years old and much younger than the U.S. stock market.

The market's latest gains follow announcements made last week of economic support and programs to encourage institutions to pump more money into stocks. The news helped stocks recover from near-year lows. The CSI 300 rose nearly 16% Best week since 2008

“The Japanese experience provides an important perspective, where the Nikkei 225 rebounded four times by an average of 34 percent on its way to a cumulative decline of 66 percent from December 1989 to September 1998,” Stephen Roach, a senior fellow at Yale Law School, noted. China Center Paul Tsai School, Tuesday in a Blog post Which was also published in the Opinion section of the Financial Times.

Economic data over the past few months have indicated slowing growth in retail and manufacturing sales. This has raised concerns that China's GDP will not reach the full-year target of around 5% without additional stimulus.

“I think what's missing is the key to a lot of this, which has yet to be revealed, which is going to be a real confidence-boosting measure, is how they're going to fix the finances of local governments,” Costello said, referring to the local trusts he once said. It relies on land sales to generate revenues to spend on public services.

While the Chinese authorities have lowered interest rates and eased some restrictions on home purchases, the Ministry of Finance has not yet announced the issuance of additional debt to support growth.

Peter Alexander, founder and managing director of Z-Ben Advisors, expects the level of fiscal stimulus – when it is likely announced in late October – to be lower than markets are hoping for.

“Investors may be a little hesitant, as people like to say,” he said Monday on CNBC.Street signs asia.”

Data on the number of new retail investors in China this year was not publicly available. Reports She notes that brokerage firms have been inundated with new orders, a reflection of how people piled into the stock market nearly a decade ago. The Shanghai Stock Exchange said on Friday that the open market transactions had been confirmed Abnormally slow.