China stocks are close to bull market highs after returning from Lunar New Year break

China’s onshore A-shares were hovering close to bull market territory on Monday, the first day after returning from the Lunar New Year holiday. The CSI 300, which tracks stocks of the largest listed companies in Shanghai and Shenzhen, closed at 4,201.35 on Monday — up 19.74% from its recent low of 3,508.7 seen on Oct. 31 last year, Refinitiv data showed. A bull market is technically defined as a period where stocks increase by at least 20% from recent lows. Mainland China markets were closed for a full week to observe the Lunar New Year holiday. Official data showed that travel and consumption spending grew compared to a year ago – national tourism revenue surged by 30% from 2022 to 375.84 billion yuan ($55 billion USD), though it fell short of spending in 2019, before the pandemic. The ChinaAMC CSI 300 Index ETF, which tracks the performance of the index was up 18% from its October lows on Monday. Chinese Premier Le Keqiang pledged to make consumption the “main driving force of the economy,” according to a brief of the State Council meeting over the weekend. The meeting also emphasized the importance of stabilizing growth, employment, and foreign trade, according to the release. “The New Year bulls of China A shares have primarily been boosted by the stimulus monetary policy and reopening optimism,” Tina Teng, analyst at CMC Markets, told CNBC in an email. She added that supportive measures in the property sector and a loosened crackdown on China’s tech companies fueled further gains. “Investors are shifting their funds from fixed-income to equity markets amid China’s reopening progress,” said Teng.

Spring rally ahead

Hao Hong, chief economist at GROW Investment Group, said China’s excess household savings will support a continued rally in stock prices. “We are at the inception of intense speculation. China’s savings glut many [took] as a sign of extreme risk aversion can be the fuel for a spring rally,” he said in a Sunday note. “As households start spending again and saving less, the economy will recover, and the market will respond,” he added. “It is the Year of the Bunny, and the market has hopped back to life.” Min Chen, head of China portfolio manager at Somerset Capital, said China’s economy will outperform its global peers in 2023. “We do expect, in this year, that Chinese policymakers have a lot of room to further support the economy,” he said, adding he expects supportive measures for the property and sees “deregulation signals” for technology platform companies. “This means that China has a good chance to stand out as a fast growing economy this year amid a global slowing down economy,” he said on CNBC’s “Street Signs Asia.”