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China Traders Sense Victory Over Markets, as Well as Virus

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    March 27, 2020 5:37 PM AEDT

    Among China’s equity trading community, a risky triumphalism is taking root. The nation, the argument goes, is shielded from global volatility and patriotic investing will be rewarded.To get more china finance online news, you can visit shine news official website.

    It’s not hard to see why. The Shanghai stock benchmark has fared better than every major gauge in the past month, with others tumbling into bear markets. Against the S&P 500 Index, the Chinese index is near its highest level in almost two years. It fell about 1.2% Friday while benchmarks in Japan, Taiwan and Korea all saw losses exceeding 2.5%.

    Fueling Chinese confidence is a sense that the country is gaining victory over the coronavirus that first spread in Wuhan. President Xi Jinping visited the city in the central Hubei province on Tuesday, a move widely read as a sign that the Communist Party believed the situation was under control. While officials first came under fire for their initial botched handling of the virus, the extreme steps that followed appear to have curbed its spread for now.

    Contrast the top-down approach taken by Beijing with the perceived chaotic response in the U.S. and Europe, where new infections are rocketing. The violent movements of global equity markets are mirroring the growing panic overseas, with volatility spiking to levels not seen since the global financial crisis and U.S. equities plunging the most since 1987.

    Given the recent trade war, and accusations in the U.S. that this a “Chinese virus,” a sense of competitive patriotism is adding stridency to the upbeat tone in Shanghai and Shenzhen. On Thursday, the hashtag ‘U.S. stocks trigger circuit breaker’ had more than 730 million views on Weibo, China’s version of Twitter, and 130,000 comments.

    As one commentator wrote on Weibo: “U.S. stock futures are nearing the circuit breaker again -- where are our China bulls? Come out and show them what we’re made of with a big surge today! Lets give them something to fume about!”

    Such nationalist comments aren’t unusual on social media in China (or in the U.S., where President Donald Trump has tweeted about the stock market dozens of times). But professional investors are also starting to adhere to the view that the resilience of Chinese financial markets reflect a kind of collective renaissance.

    One of those investors is Lin Qi, a money manager at Lingze Capital in Shanghai whose article “Those Who Buy on Behalf of the Nation will Be Richly Rewarded” was widely shared online last month. Another is Yu Dingheng at Shenzhen Flying Tiger Investment & Management Co., who is confident about the government’s ability to support sentiment.

    “We still have a lot of cards on hand, be it monetary, fiscal or industrial policies,” he said by phone. “In a state where power is highly concentrated, you can get high efficiency as long as the decisions made are the right ones.”

    Chinese state media has been quick to promote the market’s resilience, given its obvious value in strengthening support for the Communist Party. When global markets sank to start the week, a video posted by Hu Xijin, the influential Global Times chief editor, said China was an “independent anchor of confidence” and that optimism among the people was riding high.

    It’s long been a bitter ride for investors in Chinese equities. The nation’s stocks languished during the 11-year run bull market in the U.S., with the Shanghai Composite gaining just 38% while the S&P 500 rallied as much as 400%. China’s investors have also contended with six bear markets since March 2009, and a massive bubble five years ago where attempts to contain panic only spurred a further bout of selling. Investors were so exasperated with the record $2.3 trillion loss in 2018 that they resorted to black humor as an outlet.

    But having faced overseas criticism for years about the lack of maturity in the nation’s stock market, China’s traders are relishing this moment of stability. While the risk is growing that such outperformance could quickly evaporate, investors are for now seizing the opportunity to make some serious money, and bolstering the nation’s pride to boot.