China's Stock Bulls Take Back Control With Familiar Monday Rally

(Bloomberg) -- China’s world-beating equity rally resumed Monday after one of the worst routs in years caught bullish traders off guard.

The ChiNext Index led with a 4.4 percent gain, closing at its highest since June and extending this year’s surge to 38 percent. The gauge, made up mostly of private startups in the tech hub of Shenzhen, has kicked off the past five weeks with a rally of more than 3 percent. The Shanghai Composite Index added 1.9 percent, closing above the key 3,000-point level after its second-worst decline in three years on Friday.

The bright start to the week suggests a bull run in Chinese stocks remains intact after authorities signaled the pace of gains had become too extreme. It also follows the central bank governor saying Sunday that small companies will get more support, echoing comments from Premier Li Keqiang earlier in the week.

China's Stock Bulls Take Back Control With Familiar Monday Rally

The stock-buying frenzy has added more than $1.5 trillion to equity values in China since January and lifted turnover to the highest in more than three years. Monday’s gain came despite several articles in the state-run Securities Times warning of risks associated with speculative trading. Friday’s slump, meanwhile, wasn’t prominently featured in the state press.

The SSE 50 Index on Monday verged on the cusp of forming a golden cross -- a technical pattern when the 50-day moving average moves above the 200-day line, which is a bullish signal. The gauge of large caps rose 0.9 percent, taking its year-to-date gain to 18 percent. The Hang Seng China Enterprises Index, which rose 1.1 percent in Hong Kong, also neared a golden cross.

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