Chinese stocks start the Year of the Tiger on strong footing
Published: Feb 07, 2022 11:10 AM
stock market Photo:VCG

stock market Photo:VCG

Chinese stocks rallied on Monday, the first trading day of the Year of the Tiger, as market sentiment has been boosted by the successful opening of the Beijing 2022 Winter Olympic Games, which also saw an array of cooperation documents signed between China and several countries, including Russia. 

Investors are also upbeat over policy support in various areas, including consumption and investment, from policymakers to tackle downward economic pressure this year, while growing interest in Chinese stocks from foreign investors are also offering support for the market, analysts noted.

On Monday, the Shanghai Composite Index gained 2.03 percent, the Shenzhen Component Index was up 0.96 percent, and the ChiNext Index closed 0.31 percent higher. 

Trading value on the Shanghai and Shenzhen markets hit 823 billion yuan ($129 billion). A total of 3,448 stocks rallied and 109 hit the daily limit, with oil and gas shares, rare earth shares and coal shares being the top gainers.

The rally comes as a positive market reaction to the opening of the Beijing Winter Olympics, particularly after a series of close coordination agreements between China and Russia was signed during the games, which are expected to play an important role in consolidating bilateral economic and trade ties and ensuring energy supplies, Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Monday.

Stocks related to the Beijing Winter Olympic Games also surged. A gauge that includes shares relevant to the Games rose 1.54 percent during the trading day.

Share prices of Cultural Investment Holdings and Beijing Yuanlong Yato Culture Dissemination Co, cultural products manufacturers for the Beijing Winter Olympic Games, jumped by the daily limit, while engineering provider COFCO Engineering & Technology Co gained more than 5 percent.

The rally comes after demand for Beijing Winter Olympics merchandise, in particular mascot Bing Dwen Dwen, skyrocketed due to its mass popularity.

After the Beijing Winter Olympics kicked off, more than 1 million fans flooded onto the official Winter Olympic flagship store on Tmall, leaving many accessories for Bing Dwen Dwen out of stock.

In the face of the sudden boom for Bing Dwen Dwen products, the Beijing Olympic Organizing Committee said that it was actively coordinating with factories to increase supplies, CCTV reported.

Apart from the Winter Games, expectations for favorable policies for various sectors, including energy and infrastructure, also lifted market sentiment. 

Shares of banks, petrochemical companies and infrastructure construction companies also joined the rally, with PetroChina Co gaining more than 9 percent.

China's prudent and flexible monetary policy and proactive fiscal policy have created bullish sentiment in the A-share market, Bo Wenxi, chief economist at wealth management firm IPG China, told the Global Times on Monday.

The continuation of the policy support and the decline of the negative impact cast by the COVID-19 on the Chinese economy are expected to further lift market sentiment for the whole year, Bo said.

In contrast, the US stock market is facing several downward pressures, including interest rate hike expectations and the end of quantitative easing, analysts said.

"Due to these uncertainties, the US stock market may experience major turbulence and losses this year, and more international capital will choose the Chinese market as a safe haven," Dong said.

It is expected that foreign investment entering the Chinese market will increase significantly this year through stock connections or the Qualified Foreign Institutional Investor (QFII) program, as China's prudent and proactive regulatory policies and low inflationary pressure continue to boost confidence of foreign investors, Dong said.

Foreign investors have been piling into China at the start of 2022, and they set a record-high daily average of $413 million in investment inflows into the Chinese market during the first three weeks of the year, Reuters reported.

"China's market size, effective containment of the pandemic and increasing expectations for policy support, as well as the strong resilience of China's industrial base, are all contributing factors to the market," Bo said.