(Yicai) Sept. 19 — China’s margin trading balance surged to a new high on Sept. 17, propelling the Shanghai and Shenzhen stock markets to fresh short-term highs yesterday before retreating to close lower. The tug of war between bulls and bears may last for some time, but the long-term outlook for the market is optimistic, industry insiders said.
The Shanghai Composite Index closed down 1.15 percent at 3,831.66 yesterday, after rising earlier in the day to the highest point since August 2015 at 3,899.96.
The Shenzhen Component Index ended the day 1.06 percent lower at 13,075.66, after hitting 13,328.10 during trading hours, the highest since March 2022. And the ChiNext Index tumbled 1.64 percent to close at 3,095.85, after climbing to 3,168.68, the highest level since October 2024.
China’s margin trading balance on the Shanghai and Shenzhen stock markets, which is a key gauge of market sentiment and leverage levels, reached a record CNY2.4054 trillion (USD337.6 billion) on Sept. 17. The sectors most favored included electronics, power equipment, non-bank finance and computers.
The surge in margin trading has been accompanied by a rise in retail investors. The number of individual investors climbed 0.6 percent on Sept. 17 from Sept. 1 to 7.66 million, according to data from China Securities Data.
“Sharp adjustments during rapid rallies are normal fluctuations. It does not necessarily mean that the upward trend is over,” Hua Xiaowei, director of the Shanghai Securities Research Institute, said in response to the pullback.
The short and long sellers will battle with each other for some time, Hua said. Although the market will not see a major continuous correction, it will need time to achieve a further upward swing. The rapid rally seen in August may shift into fluctuations at a high level.
Value and blue-chip stocks are still attractive thanks to stable cash flows and improved interest rate spreads, said Zhang Di, chief macro analyst at China Galaxy Securities. Pricey tech stocks may come under pressure without further easing policies, but the medium- to long-term outlook for the market remains upbeat.
The Guotai Haitong Securities’ strategy team believes that the rally will not stop here and the Chinese stock indexes could hit more new highs this year.
Editor: Kim Taylor