China markets set to reopen with a roar after week-long break

SINGAPORE – Chinese markets were poised for gains and volatility on Tuesday as the return from a week-long holiday was in global focus given the blistering pre-break rally on bets Beijing’s stimulus would improve the economy.

Traders said the market open at 9.30 a.m. local time (0130 GMT) will be a barometer of sentiment – which had swung from despair to euphoria in a matter of days – and the coming sessions may test the stunning momentum.

Singapore-traded FTSE China A50 futures have gained some 14% since China’s cash markets closed on Sept. 30 and Hong Kong’s Hang Seng China Enterprises index was up 11% over the same period, pointing to a catch-up rally for the mainland.

US A-share ETFs rose sharply on Monday, though the Golden Dragon index of US-listed Chinese shares was bumpy and closed the session flat. Hang Seng futures HSIc1 were steady, following Monday’s gains in Hong Kong.

“All eyes (are) on China’s reopening,” said National Australia Bank’s senior currency strategist, Rodrigo Catril in a note to clients.

“Now the market is seemingly on a wait-and-see mode, hoping for some concrete stimulus signs that can justify the recent move up in equity prices.”

A press conference from the National Development and Reform Commission called for 0200 GMT is in focus for further details of the promises and hints that drove the market frenzy.

Before the break, China announced the most aggressive stimulus measures since the pandemic and the CSI300 gained 25% over five sessions. Turnover soared as heavy buying strained brokers and trading systems, and last Monday the CSI300 and the Shanghai Composite both notched their largest gains since 2008.

Authorities have cut rates and hinted at fiscal support to shore up an economy that, by Chinese standards, is ailing.

Before the Golden Week holiday break, hedge fund manager David Tepper said on CNBC the moves were encouraging enough that he would buy “everything” on China.

But gains have been so large that others now urge caution.

“China’s weighting in the MSCI EM Index rose from 24% in Aug to 30% now, and its continued outperformance may drive a self-reinforcing ‘pain-trade’ before the year-end,” Bank of America analysts said in a note on Monday.

However, they said, the “‘buy everything’ stage will be over soon,” with market momentum, fiscal support, earnings, the US election, and further policy settings all part of the outlook.

“Consumer, property (and) broker stocks could be profit-taking candidates … big cap internet and high-yield SOEs are our preferred exposure,” they said.

In currency markets, China’s offshore yuan eased against a rising dollar during the break, but rebounded on Monday to 7.0724 per dollar. Onshore, the yuan had closed at 7.0175 per dollar before the holiday.

(Reporting by Tom Westbrook; Editing by Jamie Freed)