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 search of better returns.
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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 also climbed 0.9 per cent, finishing at the highest close in almost a year.
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 0.1 per cent to 25,426.53, while the Hang Seng Tech Index added 0.9 per cent.
The widening breath of the gains in stocks underscores the prevailing risk-on mood on the mainland’s markets. A key gauge of stocks 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.”
The turnaround in Chinese stocks comes after years of underperformance, with investors returning as the appeal of fixed-income products fades. The yield on the 10-year bond touched a record low of 1.597 per cent in January, while the interest rate on a one-year deposit only fetches 1.5 per cent. In comparison, the companies on the CSI 300 Index offer an average dividend yield of 2.5 per cent on a trailing 12-month basis, according to Bloomberg data.
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