Chinese equities capped their most powerful weekly rally in nearly 16 years on Friday, with the mainland benchmark CSI 300 index soaring 15.7% for the week—its biggest weekly percentage gain since November 2008—as global institutional funds and domestic retail investors stampeded back into undervalued shares following Beijing's sweeping economic stimulus blitz.
The buying frenzy was so intense during Friday's morning session that order-routing servers at the Shanghai Stock Exchange experienced abnormal delays in processing trade confirmations and cancellations for roughly an hour. Despite the bottleneck in Shanghai, combined turnover across the Shanghai and Shenzhen bourses exceeded 1.45 trillion yuan ($207 billion), while the Shenzhen Component Index rocketed 6.7% on Friday alone.
Historic Turnover Strains Shanghai Order-Processing Systems
In Hong Kong, the benchmark Hang Seng Index climbed 3.6% on Friday to finish the week up 13%—its strongest weekly performance since 1998—as daily equity turnover on the Hong Kong Stock Exchange reached an all-time record of HK$445 billion ($57.2 billion). Consumer discretionary, brokerage, property developer, and technology shares led the broad-based advance.
The market eruption was ignited on Tuesday when People's Bank of China (PBOC) Governor Pan Gongsheng unveiled a 50-basis-point cut to banks' reserve requirement ratios, reductions in benchmark policy and existing mortgage rates, and 800 billion yuan in new central bank liquidity facilities specifically designed to fund stock buybacks and institutional equity purchases.
“The coordinated monetary easing and Politburo fiscal commitment have triggered a decisive repricing of Chinese equity valuations, unleashing record turnover across Shanghai, Shenzhen, and Hong Kong.”
Coordinated Monetary and Politburo Stimulus Sparks Global Reallocation
Momentum accelerated dramatically on Thursday after President Xi Jinping chaired an unscheduled economic session of the 24-member Communist Party Politburo that pledged forceful fiscal expenditure, sovereign bond issuance, and direct intervention to halt the multi-year decline in China's residential real estate market.
Global luxury conglomerates in Europe, industrial metals including copper and iron ore, and emerging-market exchange-traded funds rallied in tandem with Chinese equities, as hedge funds scrambled to unwind crowded short positions ahead of China's week-long Golden Week national holiday.
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