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China: Stocks rise to fresh 7-year high on bullish state media commentary
[SHANGHAI] Chinese stocks climbed to fresh seven-year highs on Wednesday, with investors emboldened by a commentary in state media saying the bull market "has just begun", and that there was no bubble.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.6 per cent to 4,739.81 points, while the Shanghai Composite Index gained 2.5 per cent to 4,398.49 points.
The current bull run "has support from China's grand development strategy and economic reforms," and blue chip stocks are still "undervalued", said an article published on a website run by the official People's Daily newspaper.
It said the surge in share prices was a reflection of China's growth potential and denied that prices were overheated.
"It gives psychological support to the market," said Wu Kan, head of equities trading at Shanghai-based investment firm Shanshan Finance. "Obviously, regulators hope to see a steady and healthy bull market."
During the last weekend, China unveiled a crackdown on illegal margin financing, but also announced a 100 basis-point cut in banks' required reserves, adding to investors' uncertainty over regulators' attitude toward the red-hot market, which has surged more than 80 per cent since November.
The latest People's Daily article provided markets with more confidence, China-focused investment bank NSBO wrote.
Stocks in Shanghai, home to China's blue-chip companies, are trading at 21.8 times companies' earnings. That valuation is still low compared with a price/earnings ratio of 70 at the peak of China's last bull run in October 2007.
Shenzhen's start-up board ChiNext jumped 2.7 per cent to record highs on Wednesday, trading at 94 times companies' earnings. GF Securities said in a strategy report that the craziest time for ChiNext is yet to come.
Stocks in sectors including new energy and cleantech jumped on signs that banks were stepping up financial support to manufacturers rushing to comply with tough state pollution standards.