China’s key stock index climbs to 10-year high as investors chase higher returns

Mainland Chinese stocks rose on Monday, driving a key gauge to a decade high amid increasing signs that investors have been rotating out of bonds and bank deposits into equities in hunt for better returns.

The Shanghai Composite Index advanced 0.9 per cent to 3,728.03 at the close, a level not seen since August 19, 2015. The CSI 300 Index climbed 0.9 per cent, finishing at the highest level in almost a year.

Shares worth 2.75 trillion yuan (US$382.9 billion) changed hands on the mainland’s exchanges, the most since October 9 when stocks rallied after the central bank unveiled a stimulus package to bolster equities and property prices.

The yield on China’s 10-year government bond increased 2.4 basis points to 1.771 per cent, the highest in four months. In Hong Kong, the Hang Seng Index slipped 0.4 per cent to 25,176.85, while the Hang Seng Tech Index added 0.7 per cent.

The widening breadth of the gains in stocks underscores the prevailing risk-on mood on the mainland’s markets. A key gauge on Shanghai’s technology board, a barometer of risk sentiment, surged 2.1 per cent, while a benchmark for start-ups in Shenzhen jumped almost 3 per cent. Telecoms and IT stocks were the best-performing industry groups on the broad-based CSI 300 Index, rallying at least 2.1 per cent.

“Bond yields and deposit rates are pretty low, while the wealth effect from the stock market continues,” said Amber Zhou, an analyst at Haitong International. “The rotation from bank deposits and bonds is expected to be ongoing.”