China's Hottest Stocks Are on the Brink of a Bull Market
(Bloomberg) -- The momentum of Chinese equities has accelerated so quickly that a gauge of small caps is now flirting with a bull market for the first time in years.
The ChiNext Index jumped as much as 3.1 percent Thursday, briefly taking its rally since an Oct. 18 low to more than 20 percent. Stocks extended gains following a report that China and the U.S. are working on six pacts for a potential trade deal. A close above 1,446.04 points would take the Shenzhen gauge past the threshold that typically denotes a bull market after a decline of the same magnitude.
Chinese equities have taken off this year as weak economic data made monetary policy easing almost a certainty, while the removal of trading curbs by the new securities watchdog has revived appetite for risk. The rally since January has added almost $1 trillion to the value of the country’s equities.
“We think the ChiNext will continue rallying for a while, as the correction last year was too big and policies will remain favorable” said Zhang Gang, an analyst with Central China Securities Co. in Shanghai. “Beijing is shifting policy to support private companies and prevent the risks associated with share pledging, which bodes well for smaller firms.”
The ChiNext pared its advance to 0.4 percent as of 2:33 p.m. local time, trading at 1,414.41 points.
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