(Bloomberg) — Brokerages and stock exchanges in China are gearing up for a frantic Tuesday when onshore markets reopen after a week-long holiday, with optimism running high that Beijing’s stimulus measures will give shares another leg up.
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Professionals in the information technology, operations and customer service departments at local brokerages canceled their holidays to prepare for a busy trading session, according to state broadcaster China Central Television. The number of account openings at major brokerages hit a record high during the Golden Week break, with overwhelming client demand in both online and offline channels. A Beijing-based brokerage stationed call center agents to answer client inquiries 24 hours a day, according to CCTV’s report.
Employees at the China Securities Depository and Clearing as well as stock exchanges also worked through the holiday to prepare for a surge in new accounts and to test their systems, according to people familiar with the matter.
China’s world-beating stock rally has fired up the imagination of traders and money managers across Asia, with most of the discussion centered on whether the gains will last as stimulus measures take hold. Shares in Hong Kong rallied during the holiday as Wall Street giants such as BlackRock Inc. and Goldman Sachs Group Inc. raised their recommendations. That has added to hopes that the onshore rally will continue, but raises the risk of a sharp pullback if Beijing fails to follow through with concrete measures in the coming days.
“Bullish sentiment is continuing to grow in China and I expect A-shares to play catch up,” said Andy Maynard, head of equities at China Renaissance Securities in Hong Kong. “We are busy evaluating risk limits per clients and securing funding for A-share purchases,” adding that Tuesday is likely to be “another hectic day.”
If the performance of Chinese shares listed in Hong Kong is anything to go by, markets on the mainland are likely to reopen with a bang on Tuesday.
The Hang Seng China Enterprises Index jumped 11% since the Golden Week holiday kicked off last week and reached the highest level in over two years on Monday.
The rally may gain momentum as retail investors pile in. All across China, stocks have once again become a hot dinner table topic after an unprecedented three straight years of losses.
“We had many family gatherings during the holiday. In almost every conversation with my relatives, I was asked whether it is time to buy A-shares,” said Shen, an equity sales trader at a global investment bank, who asked to be identified without his full name as he’s not authorized to speak publicly. “Many have not looked at their A-share trading accounts for years.”
Test Run
To prepare for Tuesday’s reopening, the Shanghai Stock Exchange and Shenzhen Stock Exchange conducted tests on Monday to ensure trading runs smoothly, CCTV reported on Sunday. The securities watchdog issued a circular requesting that brokerages report all account-opening activity that took place during the holidays, as well as investor concerns about the Shanghai Stock Exchange’s system, according to people familiar with the matter.
Authorities are looking to avoid a repeat of events that transpired in late September when trading activity was so intense that it led to glitches and delays in processing orders.
In addition, some Chinese brokerages have informed their clients that banks will bring forward operating hours for the transfer between banks and securities accounts to as early as 8:05 a.m. to accommodate the extended window for designated transactions, Cailian reported.
“I haven’t sold a share since 2022 and have been periodically buying since then,” said Jim Zhou, a 40-year-old retail investor in Shanghai. “It’s a 180-degree turnaround in sentiment. The financial conditions in China are changing, and the sharp moves in the stock market have given people more confidence.”
The latest data indicate that authorities’ efforts to revive the property sector are bearing fruit. Beijing city saw expressions of intent to buy new homes double in the first three days of October, CCTV said. In Shenzhen, sales of new homes jumped more than 10 times in the first six days of the month, while used-home transactions more than tripled, Cailian reported, citing Shenzhen Centaline Property figures.
Over in Macau, gross gaming revenue for the first six days of October exceeded market expectations to reach the highest run-rate since the 2019 Golden Week period, according to a note from JPMorgan Chase & Co.
Any further gains in stocks may come at the expense of government bonds, which are expected to decline when trading resumes Tuesday as investors switch from haven assets to equities. The surge in the yields could be amplified if wealth-product managers start to offload their debt holdings in chunks, a move that may unsettle the central bank.
The onshore yuan is also likely to weaken after its offshore counterpart retreated last week on the back of a stronger dollar. The currency closed near the key level of 7-per-dollar in the onshore market last Monday.
But for all the optimism in the stock market, a degree of caution still persists among some investors.
“Many of us are still haunted by the market’s multiple false dawns so we are just in this rally to make some fast money,” said Lily Zheng, a 29-year old retail investor in Shanghai. “I added positions just before the holiday after I saw the sharp moves and I am planning to cash out later this week if the market rises another 15% to 20%.”
FOMO Rally
For now, traders who are hopeful of a sustained rebound are pointing to the latest data which signal that consumer confidence may be on the mend. Passenger trips on China’s railway network rose to a record high on the first day of the week-long holiday, while nationwide travel increased 2.8% on year during the first five days of the break, slightly better than estimates, according to Citigroup Inc.
Investors are also awaiting a press briefing by China’s top economic planner on Tuesday to discuss a package of policies aimed at boosting economic growth.
The onshore market will do well on Tuesday, “partly due to FOMO,” said Xin-Yao Ng, director of investment at abrdn Asia Ltd. “It’s largely sentiment driven while investors are waiting for more fiscal stimulus to keep up the policy momentum.”
–With assistance from Tian Chen and Jeanny Yu.
(Updates with home sales data in 14th paragraph and Macau gaming revenue in 15th paragraph)
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