Chinese Stocks Reach New All-Time High

Chinese stocks reached a new all-time high for a short while, surpassing the 2007 closing peak, as mainland financial markets resumed for the first time since closing for the Lunar New Year break.

Traders and investors seemed to be very optimistic about the country's economic recovery from the COVID-19 devastation, causing the CSI 300 index of large Shanghai- and Shenzhen-listed stocks to jump as much as 2 percent to an intraday record of almost 5,931 points in early trading on Thursday as onshore markets reopened after a five-day break.

The gains were however short-lived, as China’s stock benchmark declined after briefly surpassing its 2007 closing peak. News that China’s central bank had drained a net Rmb260bn ($40bn) of liquidity from the country’s interbank system spurred a 0.7 percent decline in the index's run, within 1.9% from its all-time record high.

READ MORE: U.S. Stocks Fall From Record Highs

The CSI 300’s previous peak was 5,885 points in October 2007 in the early days of the global financial crisis. The index, which is up over 10 percent in 2021, last month eclipsed the high during its stock market bubble in June 2015 that gave way to a 40 percent crash.

China’s economy, which exceeded its pre-pandemic rate of growth in the final quarter of 2020, has shown signs of strength in recent weeks. The price of goods leaving Chinese factories last month rose year-on-year for the first time since the coronavirus crisis began, while box-office receipts have also recovered.

While traders remain bullish about the equity market’s long-term prospects, evidence of overcrowding in stocks like liquor makers has made some investors more prudent. Thursday’s moves offered a contrast to 2020 when Chinese markets plunged by the most value on record after an extended Lunar New Year break.

This year, foreign investors have been net buyers of about Rmb79bn ($12.2bn) of Chinese stocks through market link-ups between bourses in Shanghai and Shenzhen, and Hong Kong.
Foreign investors snapped up about Rmb209bn of Chinese stocks through these Stock Connect programs last year as the country became the first to bring the pandemic largely under control. 

Traders had bid the CSI 300 Index up to 13-year highs in January, but momentum cooled as investors shifted a record level of money into Hong Kong stocks as domestic prices surged.