Shanghai Composite Index posts biggest gain

by / ⠀News / October 1, 2024
Shanghai Composite Index posts biggest gain

China’s stock market has experienced a significant surge, with the Shanghai Composite Index rising to over 3,087 points last Friday. This marks the index’s biggest gain in 16 years, reversing the bearish sentiment that had seen it fall below 2,700 points on Sept. 18.

Experts remain cautiously optimistic about the market’s future, even without the strong rally.

Chen Guo, chief strategist at China Securities, noted that the turnover rate of A shares is around 1.5 percent of the free float market cap, nearing historic lows. “This often signals the end of a market adjustment,” said Chen.

“The A-share market is ready for bottoming out given companies’ profitability, average valuation, and trading characteristics.”

Positive news from external markets has also bolstered sentiment. The US Federal Reserve announced a 50-basis-point cut on Sept. 19, which is expected to improve A-share liquidity in the short term.

Shanghai Composite index’s historic surge

However, strategists stress that a sustainable rebound depends on company fundamentals and successive supportive economic policies. Governor of the People’s Bank of China, Pan Gongsheng, announced a 50-basis-point cut in the reserve requirement ratio and a swap program enabling financial institutions to obtain liquidity from the central bank.

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These measures are expected to inject significant capital into the financial market. The China Securities Regulatory Commission (CSRC) has reiterated the need to improve the quality of A-share companies. Wu Qing, chairman of the CSRC, emphasized that high-quality listed companies are the ultimate sources of investor confidence.

Changes include tighter regulations on IPOs and increased oversight of listed companies. Efforts are underway to bring more medium- to long-term capital into the A-share market. High-quality development drivers, such as the digital economy, high-end manufacturing, and new energy, need financial support.

Allowing more long-term asset management firms into the Chinese stock market would enhance liquidity and market vitality, according to industry experts.

About The Author

Kimberly Zhang

Editor in Chief of Under30CEO. I have a passion for helping educate the next generation of leaders. MBA from Graduate School of Business. Former tech startup founder. Regular speaker at entrepreneurship conferences and events.

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