FOMO Takes Over: Chinese Stocks Soar on ‘Epic’ Trading Day Ahead of Holiday

Chinese stock investors are experiencing a surge of enthusiasm as the CSI 300 Index recorded its biggest gain since 2008, officially entering a bull market. This significant rally has been driven by a wave of stimulus measures from the government aimed at easing housing woes, creating a sense of urgency among retail investors to capitalize on the market's momentum.

In just five trading sessions, the frenzy has captivated traders like Shao Qifeng, chief investment officer at Ying An Asset Management Co., who reports an influx of inquiries about whether now is the right time to invest. "On the surface, I’m keeping my cool, but deep down in my heart, I’m celebrating," he noted, reflecting the sentiment shared by many market participants.

The excitement is palpable, as trading turnover has reached record highs, overwhelming brokerages with applications and requests to open new trading accounts. The rush follows the relaxation of homebuyer rules in three major Chinese cities and a reduction in mortgage rates, part of a comprehensive stimulus package introduced last week, which also included interest rate cuts and liquidity support for stocks.

Despite previous false starts in the market, there is a growing conviction that this rally could signify a genuine turning point, driven by authorities' urgency to meet an ambitious 5% economic growth target for the year. Retail interest has become so intense that some funds, like Beijing Jiuyang Runquan Capital Management, have implemented caps on new investments, setting limits on fund subscriptions to one million yuan ($142,603).

However, caution persists among some investors. Winnie Wu, chief China equity strategist at BofA Securities, expressed concerns, stating, "It’s really hard to either chase the rally or adjust positions. It’s a very exciting time, but it is also a very difficult, challenging, painful time for many investors."

The Fear and Greed Indicator for the Shanghai Composite Index, which measures market sentiment among retail investors, reached its highest level since 2015, signaling the current excitement. Brokerages, often viewed as barometers of market sentiment, saw substantial gains, with many posting double-digit increases.

As the pivot toward risk assets gains momentum, China’s ten-year sovereign bonds experienced their largest weekly decline in a decade. Hedge funds are reallocating their investments, selling US technology stocks to invest in mining and materials firms, with iron ore prices soaring approximately 11% on expectations that the easing of property issues will bolster demand.

“This is an epic day in Chinese market history,” declared Hao Hong, chief economist at Grow Investment Group, marking it as one of the most jubilant days of his three-decade career covering the Chinese market.

While optimism runs high, some analysts remain cautious. Hebe Chen, an analyst at IG Markets Ltd, cautioned, “It’s still too early to tell if this ‘Golden-Week rush’ will blossom into a true gold rush or fizzle out into another mirage.”

As the markets prepare for a week-long holiday, the atmosphere is charged with both excitement and trepidation, leaving many to wonder if this rally will endure. mini