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China's stocks leave bonds in the dust as debt war simmers

Shanghai Composite Index on track for its best three months in almost two years

CHINA'S economy may be showing signs of cooling off but in financial markets, the signals are still decidedly bullish.

Stocks traded in mainland China are outperforming corporate bonds by the most since 2015 when it comes to yield, as investors bet that economic momentum will bolster company earnings, while Beijing's deleveraging drive continues to dog debt.

Central bank efforts to keep liquidity tight - part of its wider push to tame credit growth - are being primarily felt in the bond market, with a gauge of Chinese sovereign notes set for a fourth straight quarterly drop. The Shanghai Composite Index, meanwhile, seems impervious, on track for its best three months in almost two years.

"The government's...

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