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Shanghai composite surged 5.6% on trade talks progress, enters bull market

Chinese stocks staged a strong rally on Monday, with the benchmark Shanghai Composite index surging 5.6 per cent to break through the key psychological line of 2900, boosted by the new progress of the trade talks between the world’s two largest economies.

The Shanghai Composite surged by 5.6 per cent to close at 2961, making it more than 20 per cent higher than the January low, entering a technical bull market.

The blue-chip CSI300 index rose 5.9 per cent by close, making it 27 per cent from the recent low, while the smaller Shenzhen Component Index ended up 5.6 per cent higher. The startup Chinext index soared by over 5.5 per cent, making it 25 per cent higher than the October low. S

Trading volumes at the two bourses in Shanghai and Shenzhen, which indicated investor confidence, exceeded one trillion yuan, the highest level since November 2015.

Financial stocks, in particular stocks of securities brokerages, led the gains on Monday, with all of the 42 listed securities brokerages surging by the maximum of 10 per cent.

The rally in the sector was boosted by the remarks by Chinese President Xi Jinping that the country aims to make the financial sector and the capital market a more important part of the economy and strengthen the sector’s capability to service the real economy.

In addition, Huawei’s suppliers also outperformed after the smartphone maker unveiled the new 5G foldable smartphone on Sunday.

Banks, insurance companies, real estate developer, telecommunication firms and software developers also outperformed.

The stock market bounce was boosted by the news that China and the US have achieved substantial progress on specific issues following their latest round of high-level economic trade talks in Washington, according to the Xinhua News Agency.

The US President Donald Trump announced on Sunday that he will be delaying US tariffs on China and will be planning a summit with Chinese President Xi Jinping at Mar-a-Lago to finalize the trade agreement.

“As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!” Trump posted in two tweets.

The President cited “substantial progress” on trade talks with China, pointing to “important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.”

China’s 10-year treasury futures dropped 0.45 per cent as investors’ risk appetite increases.

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