(Bloomberg) — Chinese stocks rose on hopes that a rebound in manufacturing activity may be starting to gain momentum in China's economic recovery.
Most Read Articles on Bloomberg
The benchmark CSI300 index rose 1.6% to a one-month high on Monday, led by gains in Asian markets. All sectors except utilities and energy rose as Hong Kong markets were closed for a public holiday.
Investors are growing more optimistic about the world's second-largest economy after China's official Manufacturing Purchasing Managers Index hit its highest level in a year. This is the latest economic green shoot, along with strong exports and rising consumer prices. The CSI 300 index capped its first quarterly rise in a year on Friday as authorities rolled out a series of measures aimed at boosting growth and restoring confidence.
“The reality is that there is a growing optimism about China,” said Vishnu Varasan, chief economist for Asia ex-Japan at Mizuho Bank in Singapore. He said the move could gain momentum given “optimism in other parts of Asia that coincides with an upturn in global manufacturing.”
Private indicators of China's manufacturing activity also expanded in March, suggesting the industrial side of the economy is stabilizing. China's main stock benchmarks have rebounded strongly from their lows at the start of the year, helped by a return to foreign capital inflows amid Beijing's determination to end about $7 trillion in capital outflows.
Read more: Stock price correlation between China and India hits record low
The market still faces headwinds, including continued weakness in the domestic housing sector and rising U.S.-China tensions in areas such as technology.
The latest corporate financial results are also heightening investors' caution. Skepticism about the scope and depth of the earnings recovery resurfaced after disappointing results from sector leaders such as BYD and Wuxi Biologics Cayman.
Still, “with valuations and allocations at 10-year lows, downside room is certainly limited, which also reduces return expectations,” said Wendy Chen, an analyst at GAM Investments. Ta. “In 2024, we will see a more range-bound pattern for the overall Chinese market, while investors will focus more on alpha-generating opportunities.”
Read more: China's industrial boom is the latest sign of economic recovery (1)
(Updates the closing price.)
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP