Why does Chinese stock surge? Chinese stock market optimism drives global stock markets to soar
On July 7 this year, the trading volume in the A-share market once again broke through trillions for five consecutive days. The Shanghai stock index has risen by more than 400 points in just 7 trading days, an increase of nearly 15%. This is another surge since 2015. Both investors and currency-holding watchers are exploring. Why is China’s stock market surging in the epidemic? Is the bull market of A-share coming? How long will it last?
Reasons for the soar in the stock market
Wall Street Journal said on the 7th that part of the reason for the soar in China’s stock market is retail investors swarming into the market. At the moment, retail investors are betting that economic recovery and a loose financial environment will promote the prosperity of corporate profits. Some analysts compared this market with the one in 2015, which lead some investors to adjust their positions. The British Financial Times said that from June 2014 to June 2015, Shanghai’s main stock index rose about 150%. But then it fell 32% in less than a month.
The continuous soar of the Chinese stock market is driven by multiple factors. Analysts believe that the surge is mainly due to the public’s emotional response to bull market expectations. However, the US media do not know about the improvement of China’s epidemic situation and the trend of economic recovery. They attributed it to the propaganda of China’s official media. It is so ridiculous.
Will the outlook for the Chinese stock market continue?
Buoyed by the surging of the Chinese stock market, the US stock market also soar. According to Nihon Keizai Shimbun, China’s stock price was higher, which promoted the fund inflow to the stock markets across Asia.
The CNBC stated that the Chinese economy is facing many obstacles, including trade issues with the United States and increasing friction. However, the current improvement has also “spilled over” to foreign stock markets, such as the Japanese and US stocks.
So is the bull market of A-share coming? Experts believe that it is still no coming. It is a heavy rebound. Chinese stock market is still facing three uncertainties. First, the impact of the epidemic on the Chinese economy has not been fully showing up. Second, the flooding of the European and American epidemic has led to a great impact on the export and foreign trade business. Third, the consequences of the United States to suppress the Chinese economy are still uncertain. Experts believe that with the three major uncertainties still exist, the bull market will not arrive so early.
But it can not be denied that the stock market in China is soaring healthier and stronger than the United States. The resilience of Chinese economic growth is far stronger than that of the United States. The GDP growth rate in 2020 in the United States is 1% and -8% respectively. China’s economic growth rate is 9% higher than that of the United States. From a fundamental perspective, China’s fundamentals support stronger.
Second, the United States has significantly more currencies than China. Since the epidemic, the Fed’s balance sheet has expanded from 4.2 trillion U.S. dollars in February to a maximum of 7.2 trillion U.S. dollars, which has exceeded 2 times the scale of the financial crisis during the 2008 financial crisis. In the same period, the People’s Bank of China was significantly more restrained. After the epidemic, it cut 30 BP the interest rate and reduce reserve ratio 2 times. which was far lower than the level during the 2008 financial crisis.
The valuation advantage of A-shares is obvious. the A-share market is in the expansion and growth period, and the policy promotes the development of the capital market. In contrast, the valuation of the US market is at an all-time high. The Nasdaq index has reached a new high, and the valuation was further improved. There is a large bubble. Taking all the above into account, China A-shares are more supportive.