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China’s A-share market surges to new heights
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China’s A-share market surges to new heights

Investors make record gains, but uncertainty looms

Since 24 September, China's A-share market (A股)—which includes shares of Chinese companies traded in RMB on the Shanghai, Shenzhen and Beijing stock exchanges—has experienced a remarkable rally, the likes of which haven’t been seen in years.

In just five days, the Shanghai Composite Index (沪指) surged by 21%, the Shenzhen Component Index (深证成指) climbed 30%, while the ChiNext (创业板) and STAR Market (科创板) indices rose by 42% and 36% respectively.

As the National Day holiday approached, investors riding this frenzied bull market (疯牛) feared the week-long break would interrupt what seemed like unstoppable momentum.

The catalyst behind this surge was an announcement made by the People's Bank of China (PBoC) on Tuesday 24 September. During a press conference held by the State Council Information Office, the bank's governor, Pān Gōngshèng 潘功胜, announced a series of new measures to stimulate the ailing Chinese economy: 

Beyond the anticipated measures, such as lowering the reserve ratio, Pan signalled direct support for the stock market.

He announced the introduction of swap facilities for securities, funds, and insurance companies, which would improve market liquidity, giving investors greater flexibility to manage their portfolios and invest more freely in the stock market.

Pan also announced special re-lending programs to assist banks and major shareholders in providing loans for stock repurchases. The Governor hinted too at the potential establishment of a stabilisation fund. 

央行行长潘功胜除了宣布下调存款准备金率等常规货币手段之外,专门谈到对股市的支持。潘功胜表示,央行将创设证券、基金、保险公司互换便利,支持金融机构从中央银行获取流动性,大幅提升资金获取能力和股票增持能力。同时还表示将创设专项再贷款,引导银行向上市公司和主要股东提供贷款,支持回购、增持股票。除此之外,潘功胜还表示,正在研究平准基金的创设。[1]

Market confidence soared, and so did share prices. 

Two days later, A-shares received another boost following a Politburo meeting on 26 September. In a rare move, the meeting's readout acknowledged the challenges facing China's economy, and sent a strong signal that more stimulus policies were on the way.

This further fuelled investor enthusiasm, and the A-share market continued to soar.

According to analysis in the Chinese media, it was this line from the Politburo meeting readout which got investors excited: 

“It is crucial to take proactive steps in key areas by effectively implementing existing policies and introducing new policies, so as to make measures more targeted and effective, which will enable us to achieve the year's economic and social development goals.”

要抓住重点、主动作为,有效落实存量政策,加力推出增量政策,进一步提高政策措施的针对性、有效性,努力完成全年经济社会发展目标任务。

  • Note: Characteristically vague and open to interpretation, as investors would to find out soon enough. More on that below.

At the time, this combined signalling from the authorities led to one of the strongest rallies ever witnessed in the Chinese stock markets. 

Unlike international exchanges, the majority of investors in Chinese stocks are individuals not institutions, known as sanhu in Chinese (散户).

Following the surge in A-shares before the holidays, the number of new sanhu trading accounts opened at major brokerages hit a record high during the Golden Week break, according to state media.

Many of these accounts were opened by 'new investors' (新股民), with no prior investment experience, using their own money in hope of getting rich quickly, unaware of the risks involved:

When the market surged, first-time investors were ecstatic.

They rushed to open accounts and join the frenzy, eagerly hoping to get a piece of the action.

当市场暴涨时,"新股民"兴奋异常,纷纷开户入市,期待着能够在这场狂欢中分一杯羹。

One young but experienced stock market investor and blog writer comments on how his investor friends, some of whom are “new investors”, have had mixed results: 

Some people seized the opportunity and made enough for a down payment on a flat. 

Others, despite gaining 10%, are still down by around 30% overall and need several more rallies to break even. 

Some, even after making a profit, still feel frustrated for missing out on stocks that doubled in value. 

Then there are those who just joined the frenzy, planning to Photoshop a stock chart to fool themselves.

有些人赶上了机会,赚了一套房子的首付。有些人虽然赚了十个百分点,但是整体依旧亏损30%左右,还需要几个涨停才能解套。有人虽然赚到了,依旧为没买到翻倍股难受。还有人强行凑热闹,打算P个图骗骗自己。[4]

This recent surge underlines four years of losses in China’s stock markets. 

China's A-share market began its downward trend in early 2021. Since then the Shanghai Composite Index dropped from over 3,700 points to around 2,600, which is a decline of nearly 30%; the ChiNext Index has fallen by half over the past four years, while the STAR Market Index has accumulated losses of over 60%.

According to some reports, the performance of the Shanghai exchange is probably much worse, but has been distorted by relatively well performing large-cap stocks, concealing the true extent of the market’s downturn, something we explored earlier this year when China's A-shares tanked by over 8%.

When compared to international exchanges, the performance of China's A-share market over the last four years is even worse.

Since 2021, U.S. and European stock markets have seen cumulative gains of around 50%, while the Indian stock market has surged by 80%. Even Japan, whose stock market had been stagnant for decades, hit a new historic high this year. 

In contrast, the disappointing performance of Chinese stocks has led to some creative online jokes and memes shared by investors online in China, like: 

I love India! I love Indian stock markets! I hate the cancerous A-Shares!

我爱印度,我爱印度股市,我恨癌股。

Since establishing the A-share market in 1990, China has experienced eight bull markets.

According to one prominent finance blogger, the current surge in the Chinese markets has parallels with the bull market of 1999:

If we were to draw a parallel between the current market rally and previous bull markets, it most closely resembles the "519" rally that erupted in 1999.

Between May 19 and June 29 of that year, the Shanghai Composite Index surged from 1,047 points to 1,756 points, a remarkable 66% increase over 31 trading days. 

At the time, the macroeconomic environment bore some similarities to today. Following the 1997 Asian Financial Crisis, the global economy was in a slump, China's exports steadily declined, and by 1998, they had turned negative.

我认为本轮行情如果要隐射过去牛市的话,与1999年爆发的519行情最为类似。当年5月19日至6月29日,上证指数从1047点飙升至1756点,31个交易日累计涨幅高达66%。彼时的宏观经济环境,与当前有些相似。1997年亚洲金融风暴过后,全球经济陷入低迷,中国出口一路下行,到1998年变为了负增长。 [2]

So, will the A-share "crazy bull" (疯牛) continue to rise and transform into a "slow bull" (慢牛), or is this merely a short-term aberration driven by market sentiment?

Since returning to work after the Golden Week holidays, investors have already faced disappointment and turbulence. A government press conference held on Tuesday, 8 October, which many hoped would provide more details on further stimulus policies, failed to meet expectations.

On that day, share prices tumbled. The Shenzhen Composite Index dropped by 8.2%, marking its biggest fall since the Asian financial crisis in May 1997, while the Shanghai Stock Exchange fell by 6.6%.

However, as of this writing, the markets remain higher than they were before 24 September. By the close of trading on Friday, 11 October, the Shanghai Index stood at 3,372 points—still 491 points (or 17%) higher than before the PBoC's announcement.

So, what next…?

That's what we are exploring this week!

  • 🎧 Podcast Preview: This week on the RTM+ Member Podcast, we dive into the various ways to describe a “bull market” (牛市) in Chinese, along with the subtle yet confusing distinctions in the usage of the word “stimulate” (刺激). Don’t want to mix up “economic stimulus” (刺激经济), which has a positive connotation, with “emotional stimulation” (刺激感情), which is definitely negative? Join us at the 11-minute mark to enhance your language skills, build confidence, and steer clear of any embarrassing mix-ups!


Favourite Five

Artwork by Derek Zheng for RealTime Mandarin

1. 放水 fàng shuǐ

inject liquidity, flood the market with money

央行很快便宣布了力度很大的降准降息政策,并且定向向股票市场“放水” - The central bank quickly announced a policy to significantly cut reserve requirements and interest rates, while flooding the stock market with liquidity. [2]

  • Note: this phrase “releasing water” can mean "match fixing" in football or "cheating" more generally in sport, like when some competitors in the Beijing Half Marathon were accused of letting Chinese runner, He Jie win earlier this year. It's all about context! 

  • Related: 

    • 大水漫灌 dà shuǐ màn guàn - "big water fills irrigation", excessive monetary stimulus (specifically referring to the 4-trillion-yuan stimulus package announced after the 2008 global financial crisis)

2. 组合拳 zǔ hé quán

combined fist; a series of combined measures

一系列组合拳出台之后,全方位点燃了投资者的信心 - After a series of combined measures were introduced, investors’ confidence was fully reignited. [1] 

  • Note: In English this might also be translated as a "suite of measures". 

3. 分一杯羹 fēn yì bēi gēng

get a piece of the action, take a slice of the pie

他们兴奋异常,纷纷开户入市,期待着能够在这场狂欢中分一杯羹 - They were extremely excited. They opened trading accounts to join the frenzy, hoping to get a piece of the action. [3] 

4. 落袋为安 luò dài wéi ān

secure the profits, cash out

他们首先考虑的是如何将利润落袋为安,生怕市场回调 - Their priority was to secure their profits, as they feared a market correction. [3]

5. 天时地利人和 tiān shí dì lì rén hé

the right conditions

A股本轮行情能够有如此之强的爆发力,源于“天时地利人和” - The explosive momentum of this A-share rally came down to the right timing and favorable conditions. [2]


Consuming the Conversation

A “sanhu” investor felling pleased with himself… for now… (Image: Sohu)

Useful words

6. 点燃 diǎn rán

ignite, spark

迅速点燃了A股市场的大行情 - It quickly ignited a major rally in the A-share market. [1]

7. 刺激 cì jī

stimulate, boost

刺激的力度远超预期 - The level of stimulus far exceeded expectations. [1]

  • Related:

    • 提振 tí zhèn - boost, uplift

    • 激活 jī huó - activate, invigorate

8. 涨幅 zhǎng fú

rise, increase

当天A股市场就快速上涨,主要股指的涨幅都超过了4% - On that day, the A-share market quickly surged, with the main indices rising by more than 4%. [1]

  • Related:

    • 跌幅 diē fú - decrease, drop

    • 股指 gǔ zhǐ - stock index

    • 行情 háng qíng - market trend

9. 反弹 fǎn tán

rebound, bounce back

仅靠政策刺激,也无法催生出如此大的反弹动能 - Policy stimulus alone could not have generated such strong rebound. [1] 

10. 凶猛 xiōng měng

fierce, aggressive

过去几年跌幅最大的创业板和科创板,反弹势头也更加凶猛 - The rebound of the ChiNext and STAR Market, which had the largest declines in recent years, has been even more aggressive. [1]

  • Related:

    • 汹涌 xiōng yǒng - surging, turbulent

11. 亢奋 kàng fèn

overexcited, hyperactive

关键是市场亢奋情绪降温之后,A 股市场会何去何从 - The key question is where the A-share market will go once the overexcitement cools down. [1]

12. 疯牛 fēng niú

crazy bull, irrational exuberance

对于今天的A股疯牛也极具借鉴价值 - It offers valuable lessons for today’s crazy bull market in A-shares. [1]

  • Related:

    • 牛市 niú shì - bull market

    • 慢牛 màn niú - slow bull, steady rise

13. 飙升 biāo shēng

soar, surge

上证指数从2700点飞速飙升至3336点,涨幅已达22% - The Shanghai Composite Index soared from 2700 points to 3336 points, a rise of 22%. [2]

  • Related:

    • 攀升 pān shēng - climb, ascend

Three-character phrases

14. 导火索 dǎo huǒ suǒ

trigger

引发这一轮A股暴涨的导火索,是最近政策层面对于股市、房地产和经济的扶持逐渐升温 - The trigger for this round of surges in the A-share market was the increasing support for the stock market, real estate, and the economy from recent policies. [1]

15. 史诗级 shǐ shī jí

epic

有人踏空,活在了史诗级大涨的恐惧与愤怒之中 - Some people missed out and lived in fear and anger during the epic rally. [2]

Idioms

16. 如火如荼 rú huǒ rú tú

in full swing

9月30日,就在A股如火如荼之际,日经指数再度暴跌了5% - On September 30th, as the A-share market was in full swing, the Nikkei index plunged another 5%. [1]

17. 盆满钵满 pén mǎn bō mǎn

make a fortune

这一波超级行情,有人赚得盆满钵满 - During this super rally, some people made a fortune. [2] 

18. 不二法门 bú èr fǎ mén

the only way, the best solution

对此,放水刺激经济是不二法门 - In this case, injecting liquidity into the economy is the best solution. [2] 

  • Note: literally "no second way to do it", a phrase which has its origins in Buddhism.

19. 石破天惊 shí pò tiān jīng

earth-shattering

在当时看,有点石破天惊,这是股票市场的发展第一次得到了最高层肯定 - At the time, it was earth-shattering, as it was the first time that the need to develop the stock market received top-level attention. [2]

20. 伺机而动 sì jī ér dòng

wait for the right moment, act when the opportunity arises

对于仓位已经很高的投资者,伺机而动就好 - For investors with high positions, they only need to wait for the right moment. [2]

21. 急不可耐 jí bù kě nài

impatient

周围不少人不知道开户交易的要求,只是看到他25%的涨幅,就急不可耐地开户了 - Seeing the 25% gain, many people hurried to open an account, even though they had no idea of how to actually do that. [4]

22. 好景不长 hǎo jǐng bù cháng

good times don't last long

可惜,好景不长,后来股市就进入了漫长的萎靡期 - Unfortunately, the good times didn't last long, and the stock market entered a prolonged slump.

Phrases

23. 止跌回稳 zhǐ diē huí wěn

stabilise after a decline

政治局会议首次提出了“要促进房地产市场止跌回稳” - The Politburo meeting proposed "to stabilize the real estate market after a decline" for the first time. [1]

  • Related:

    • 止跌企稳 zhǐ diē qǐ wěn - halt decline and stabilise

24. 吃定心丸 chī dìng xīn wán

put at ease, reassure

中央政治局会议罕见在9月末召开,相关定调与表述,给市场吃了定心丸 - The Politburo meeting was unusually held in late September, whose tone and statements reassured the market. [2]

25. 尝到甜头 cháng dào tián tou

taste the sweetness, experience benefits

05后股民,第一次尝到了股市的甜 - Investors born after 2005 reaped the benefits of the stock market for the first time. [4]


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