Foreign media said China is becoming a new safe haven for global investors.
According to a report by Hong Kong's South China Morning Post website on March 5, the continued rise in China's stock market and the rebound in the renminbi exchange rate over the past week have sparked speculation that with the COVID-19 epidemic in China seemingly under control, China could become a new investment safety harbor for investors in other major economies hit by the epidemic.
Although the latest data show that China's manufacturing and service activities contracted sharply in February due to the impact of the new crown pneumonia epidemic, the Shanghai Composite Index rose by about 10% in the past month.
The renminbi also rose 0.73 percent against the dollar to below the key psychological line of 1 dollar to 7 yuan, making it the second-best performer of 11 major Asian currencies.
Michael Metcalfe, global head of macro strategy at State Street Global Markets, said: "It is a strange fact that China's stock market has outperformed global stock markets, although China's economic growth at least from the beginning seems to have definitely taken the biggest hit. ”
Since trading resumed after the Spring Festival, China's stock market has attracted 850 billion yuan in stock purchases through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect in February, up from 506 billion yuan in January and 450 billion yuan in December last year.
Chinese bonds held by foreigners also increased from 1.88 trillion yuan in December last year and 1.89 trillion yuan in January this year to 1.95 trillion yuan in February.
Stephen Innis, chief market strategist at Axi, a financial services firm, said investors' favor for China's stock market and renminbi can be attributed in part to the shift in the epicenter of COVID-19.
"Now that the panic has shifted to Europe and even the United States, those regions are starting to test more aggressively [for the virus]," Innes said. As a result, the market is shifting to other safe havens (such as China). ”
According to the Financial Times website reported on March 5, as investors pinned their hopes on Beijing to introduce more relief measures, China's stock market rebounded strongly after the sell-off triggered by the new crown pneumonia epidemic, closing at a two-year high on the 5th.
Despite the widespread impact on China's supply chain, the CSI 300 index rose 2.2 percent on the day, making it the world's best-performing major stock index. The index has risen nearly 3 percent so far this year, while most of the world's major stock indexes have fallen. The S&P 500 fell 3 percent and the FTSE 100 fell 1.6 percent.
The SZSE Composite Index, which focuses on smaller technology companies, has performed better, up 12 percent this year, largely because quarantine measures have forced people to stay at home, which has benefited Internet companies and ushered in a wave of gains, in addition to speculation by retail investors. The Shanghai Composite Index, which covers more financial and industrial companies, lags far behind, rising just 0.7 percent so far this year.
Thomas Gatley, an analyst at Longzhou Economics, said that as the economic damage caused by the epidemic becomes apparent this month and next month, policymakers are likely to "continue to announce more monetary and fiscal stimulus measures to the market", thereby pushing up the stock market, despite expectations of corporate profits in the first quarter "terrible".
According to a report on the Bloomberg News website on March 5, the global market has been in turmoil recently. Central banks scrambled to contain panic.
According to reports, the Shanghai Composite Index and the Shenzhen Composite Index rose 14% in just over a month, closing at a two-year high on the 5th. As investors raced to chase the tech stocks, an exchange-traded fund (ETF) focused on 5G technology harvested $2 billion in days. Treasury prices have also risen sharply, with 10-year yields near their lowest level since 2002.
This is very different from a month ago, when factories across China were hit by the COVID-19 pandemic, cities were locked down, and stock markets suffered the sharpest sell-off in years.
Eugenia Victoriano, head of Asian strategy at Sweden's Nordic Bank, wrote in a report on the 5th: "The Chinese stock market provides an opportunity to hedge the recent volatility of global risk assets. We continue to be bullish on the recent rebound in China's stock market. ”