China Traders Are Making Easy Money While Rest of World Panics

Global markets in turmoil. Central banks rushing to arrest panic. But in China, the country most affected by the virus outbreak, it’s boom time for traders. A gauge of stocks in Shanghai and Shenzhen has jumped 14% in just over a month to close at a two-year high on Thursday. One exchange-traded fund focused on 5G amassed $2 billion in days as investors clamored to chase a rally in tech shares. Seeking to maximize returns, punters have driven stock leverage and daily turnover past 1 trillion yuan ($142 billion), both near four-year highs. Government bonds have surged too, with the 10-year yield approaching its lowest level since 2002.

It’s a sharp turnaround from just a month ago, when the virus darkened factories across the nation, whole cities were isolated under quarantine and the stock market was hit by the most savage selling in years. The swift response from the Communist Party to arrest the spread of the deadly disease helped restore confidence as the number of new infections outside of the worst-hit province of Hubei drop. A succession of policy-easing measures ensured liquidity was ample in markets, with a measure of interbank borrowing costs tumbling to its lowest level in almost a decade. Another impetus for the rally: the prospect of massive fiscal stimulus similar to that unleashed in the wake of the global financial crisis.

The result is an explosion of speculative trading by Chinese investors hooked on greed at a time when global equity markets are imploding and fear is rampant. That’s helped Shanghai’s equity benchmark become this week’s top-performing in the world. Such a disconnect by China’s still largely insulated markets isn’t unusual. A stock bubble in 2015 existed in isolation to the rest of the world before bursting violently, which global peers mostly shrugged off. As China’s markets continue to defy gravity, the rest of the world can only look on with wonder — or fear that it could all come crashing down.

China Traders Are Making Easy Money While Rest of World Panics, Bloomberg, Mar 5