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Chinese stocks rallied heading into the year-end, boosted by a rotation into some of 2023’s worst-performing sectors and a supportive global backdrop. The CSI 300 Index gained 2.3% to cap its best day in five months, as overseas investors bought onshore equities worth 13.6 billion yuan ($1.9 billion) on a net basis in Thursday’s session. A subgauge of industrial stocks — this year’s biggest loser on the CSI 300 — surged the most, climbing nearly 4%. The yuan strengthened in both onshore and offshore markets.
Investors largely attributed the jump to bottom fishing and year-end position adjustments, with some of the most battered renewables leading Thursday’s gain. Solar equipment maker Suzhou Maxwell Technologies Co rose by the 20% limit while blue-chip Contemporary Amperex Technology Co ended 5.6% higher. The upswing comes as the CSI 300 benchmark is poised to cap an unprecedented third straight year of losses, a selloff that’s dragged valuations sharply lower and prompted some money managers to add to their holdings of the nation’s equities heading into 2024. Global equities have been gaining over the past few sessions, buoyed by bets that the Federal Reserve will cut interest rates next year.
“We started to get excited about a pending rally this week, and the move affirms our view that this is not the time to be fretting about risks, rather to be actively seeking opportunities,” said Zeng Jiqing, fund manager at Beijing Nuohua Investment Management Co.
China stocks were looking cheap by various measures following a relentless rout. The estimated price-to-book ratio for the CSI 300 fell to the lowest since 2014, while the spread between China’s 10-year sovereign bond yield and the CSI 300’s estimated dividend yield just reached the narrowest since early 2020, making stocks close to the cheapest ever compared with bonds.