Shanghai Composite Flirts With 4,000 as Hong Kong Equities Surge

China’s Shanghai Composite Index briefly surpassed 4,000 for the first time since 2008, extending the world’s biggest stock-market rally as investors bet authorities will increase monetary stimulus to bolster economic growth.

The benchmark equity gauge surged to as high as 4,000.22 before paring gains to close 0.8 percent higher at 3,994.81. The index has doubled since January 2014 as traders borrowed a record amount of money to buy shares, new investors opened stock accounts at an unprecedented pace and government officials endorsed the rally. A gauge of Chinese shares in Hong Kong jumped 5.8 percent for the steepest gain since December 2011.

China’s central bank has cut interest rates twice since November and analysts predict authorities will ease policy further to keep economic growth above their 7 percent target. The nation’s individual investors, who account for about 80 percent of equity trading, may view the 4,000 milestone as a signal to boost holdings, according to Shenwan Hongyuan Group Co., the nation’s second-largest brokerage by market value.

While the market’s rapid ascent has fueled concerns of a bubble, Shenwan Hongyuan estimates the Shanghai index may rise to 4,500 as individuals shift more of their assets into equities. The gauge is still well below its all-time high of 6,092.06 in October 2007.

Source : Bloomberg