Among China’s equity trading community, triumphalism is taking root.
It’s not hard to see why. The Shanghai stock benchmark is the only global gauge of note to post gains in the past month, while others are succumbing to bear markets. Against the S&P 500 Index, the Chinese index is nearing its highest level in almost two years.
Fueling Chinese confidence is a sense that the country is gaining that first spread in Wuhan. President Xi Jinping visited the city in the central Hubei province on Tuesday, a move widely read as a sign that the Communist Party believed the situation was under control. While officials first came under fire for their initial botched handling of the virus, the extreme steps that followed appear to have curbed its spread.
Contrast the top-down approach taken by Beijing with the perceived chaotic response in the U.S. and Europe, where new infections are rocketing. The movements of global equity markets are mirroring the growing panic overseas, with volatility spiking to levels not seen since the global financial crisis and U.S. equities plunging so fast they triggered circuit breakers.
Given the recent trade war, and accusations in the U.S. that this a “Chinese virus,” a sense of competitive patriotism is adding stridency to the upbeat tone in Shanghai and Shenzhen. On Thursday, the hashtag ‘U.S. stocks trigger circuit breaker’ had more than 730 million views on Weibo, China’s version of Twitter, and 130,000 comments.
As one commentator wrote on Weibo: “U.S. stock futures are nearing the circuit breaker again — where are our China bulls? Come out and show them what we’re made of with a big surge today! Lets give them something to fume about!”
Such nationalist comments aren’t unusual on social media in China (or in the U.S., where President Donald Trump has tweeted about the stock market dozens of times). But professional investors are also starting to adhere to the view that the resilience of Chinese financial markets reflect a kind of collective renaissance.
One of those investors is Lin Qi, a money manager at Lingze Capital in Shanghai whose article “Those Who Buy on Behalf of the Nation will Be Richly Rewarded” was widely shared online last month. Another is Yu Dingheng at Shenzhen Flying Tiger Investment & Management Co., who is confident about the government’s ability to support sentiment.
“We still have a lot of cards on hand, be it monetary, fiscal or industrial policies,” he said by phone. “In a state where power is highly concentrated, you can get high efficiency as long as the decisions made are the right ones.”
Chinese state media is also promoting the market’s resilience. When global markets sank to start the week, a video posted by Hu Xijin, the influential Global Times chief editor, said China was an “independent anchor of confidence” and that optimism among the people was riding high.
The Securities Times newspaper also ran commentary saying “the view from yuan assets looks unique” and that “a growing number of market participants are seeing yuan assets as a haven.” A package on a prime-time TV news show, which rarely gives air time to markets, featured a three-minute segment on stocks that led with the U.S. futures circuit breaker.
Chinese stocks have languished during the 11-year run bull market in the U.S., with the Shanghai Composite up just 38% while the S&P 500 rallied as much as 400%. China’s investors have also contended with six bear markets since March 2009, and a massive bubble five years ago where attempts to contain panic only spurred a further bout of selling. Investors were so exasperated with the record $2.3 trillion loss in 2018 that they resorted to bleak humor as an outlet.
Chinese traders have for years had to fend off overseas criticism about the state of the nation’s stock market. While risks to the current rally are growing, investors are seizing the opportunity to make some serious money — and bolster the nation’s pride.
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