Shanghai share market climbs above 5,000 points
The Shanghai Composite Index broke through 5,000 points for the first time in seven years, a milestone that came just days before a much-anticipated decision on whether Chinese domestic shares will be included in a key global markets index.
Shanghai's main share index has rallied 55 per cent so far this year, on record trading volumes. After rising above the psychologically important 5000 barrier at the market's open on Friday, the Shanghai Composite Index closed at 5023.10, up 1.54 per cent.
The stockmarket has been hit by volatile trading over the past few weeks amid concerns about margin lending growth and speculation on whether the latest bull-run can last.
Shanghai's main share index has rallied 55 per cent so far this year, on record trading volumes. Bloomberg
Global index giant MSCI will decide on Tuesday after the markets close in the US whether to include China's domestic equities or A-shares in its global emerging markets index.
Any change favouring the inclusion of Chinese shares would provide another driver for the market, which has had an impressive run in recent months as retail investors piled into equities. Still, many analysts believe the MSCI will delay inclusion until later in the year, which could be viewed as a set back for Chinese policymakers looking to open up its capital markets and internationalise the yuan.
Daily turn-over on the Shanghai and Shenzhen Stock Exchanges has doubled in less than six months, surpassing 2 trillion yuan ($400 billion) for the first time during trade last Monday. These levels were maintained for most of last week.
This is up from daily turn-over of 1 trillion yuan on December 5 and equates to 150 million yuan being traded ever second.
The surge in volumes has seen the Shanghai and Shenzhen exchanges overtake their more storied counterparts in the United States and claim the title as the world's most traded markets.
The value of stocks traded in Shanghai and Shenzhen is now seven times greater than the New York Stock Exchange and Nasdaq Exchange.
While fears remain that China is swapping a housing bubble for a stock market bubble, there remains no shortage enthusiasm among retain investors.
"This boom has been created, led and guided by the government so it is unstoppable," said Zhang Qinghai, a retired tour guide and close follower of the market.
The doubling of the Shanghai Composite since October has delivered a huge wealth affect to investors across China and is driving consumer spending on everything from overseas travel to new cars.
It is estimated that Shanghai investors have benefited most from the boom, generating average profits this year of 156,000 yuan, according to financial information provider Tong Hua Shun.
This is nearly three times the average annual wage for residents of China's commercial capital.
The boom has also seen a record number of new mutual funds being launched.
Since the start of the year 297 mutual funds have been established raising 704 billion yuan ($140 billion). This is more than all the money raised by mutual funds last year. And the new listings market is also booming.
Over the past few weeks, trading on the Shanghai market has been volatile, with some analysts predicting the market may be on the verge off a correction. But the market rallied again this week to break through 5000.
There are concerns about the level of margin lending which is now close to 3.5 per cent of GDP. Speculation new regulations will be introduced to curb margin lending has contributed to the volatility in the market.
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