Chinese stocks strode higher again yesterday, pushing the main index to a fresh 40-month high, as retail investors shrugged off data pointing to a deepening decline in the real economy. The Shanghai 50, which tracks the biggest mainland shares, rose 4.5 per cent. It has gained 40 per cent in a month.
Following the central bank’s first cut in benchmark interest rates in more than two years last month, investors appear to believe a fresh easing cycle is under way. An ailing real estate market is dragging on investment, spreading pain to linked industries such as steel, base metals and transportation.
“Before, the government promised not to ‘add water’,” says Liu Haiying, chief economist and partner at Capital-Edge Investment Management, a Shanghai-based macro hedge fund, using a phrase for pumping money into the financial system.