Shanghai stocks soar on economic optimism

Shanghai markets
Shanghai markets
owngarden/getty

Shanghai stocks surged on Monday to a more than two-year high as investors piled in following a combination of rosy predictions for the market and strong economic data.

The benchmark Shanghai Composite Index gained 5.71%, or 180.07 points, to 3 332.88, its best close since March 2018, while the Shenzhen Composite Index, which tracks shares on China's second exchange, gained 3.90%, or 79.70 points, to 2 121.59.

The Hang Seng Index in Hong Kong rose 3.81%, or 966.04 points, to 26 339.16.

Mainland Chinese shares have languished for much of the year because of economic shutdowns caused by the coronavirus, but have been on a spurt lately, rising more than 12% over the past week.

Investors have grown increasingly optimistic, helped by data last week showing that factory activity picked up pace in June.

Zhang Gang, a strategist with Central China Securities, said that and other signs had raised expectations of stronger-than-expected second-quarter economic growth. Figures are due for release next week.

He added that recent new policies aimed at boosting the securities sector had also lifted sentiment, and he expected the rally to continue.

"The epidemic has suppressed consumption too much and now there's a huge rebound. The growth of the consumer sector will quickly return to a normal pace and so will general economic growth," he said.

Economists caution, however, that momentum may weaken in the second half as key overseas markets continue to struggle with the health crisis.

Leading brokerage China International Capital Corp also predicted that Chinese share markets could double in value over the next five to 10 years.

The prediction was widely reported by Chinese media on Monday, with analysts saying it likely contributed to the day's sharp rise.

Securities shares were among top gainers.

Guosen Securities jumped by the daily limit of 10%, closing at 14.14 yuan, while First Capital Securities also rose the maximum amount, to 9.11 yuan.

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