Dead Cats And Such: Chinese Stocks Surged Monday After Shanghai Exchange Flags ‘Obvious Opportunities’

Investors should not be overly optimistic about the short-term rally, as the mid-term uncertainties including trade war worries and Beijing’s deleveraging campaign persist.

That’s from Pacific Securities’ Zhou Yu, who spoke to Reuters for a piece about what was the best day for Chinese equities in some two years.

The Shanghai Composite, laid low by the threat of an escalating trade war with the U.S., surged 2.5%, the best day since May of 2016 and a welcome reprieve considering the gauge has fallen for seven consecutive weeks.

The SSE50 fared even better, surging nearly 3%:

H-shares – which are also in a bear market – rose 1.4%.

The yuan rallied the most against the dollar in nearly 3 months. Apparently, the optimism around the currency on Monday stemmed from a lack of bad news more than it did any actual signs of progress on the trade front.

“Some market participants pared back their short yuan positions, as there was no further escalation in China-U.S. trade tensions over the weekend,” Mizuho’s Ken Cheung told Bloomberg.

Chinese data will be in focus this week and the market will be watching closely for any signs of intervention (verbal or otherwise) from Chinese authorities in the yuan, mainland equities or both.

We got a look at reserves on Monday and it was steady as she goes in June, with the nation’s war chest increasing marginally (by US$1.5 billion to US$3.11 trillion).

For those who missed it, here’s a handy reference guide from Barclays who was out last week speculating on how PBoC policy might evolve should the trade war be taken to its logical (or maybe “illogical” is better) conclusion:

Amusingly, the Shanghai Stock Exchange actually asked people to buy in what amounted to a blog post on Sunday. Here are some fun excerpts:

Indeed, several Shanghai-listed companies have disclosed plans for buy-backs for stake increases by shareholders, showing that the companies and shareholders are adamantly confident of listed companies’ operations, profitability and growth prospects.

Currently, the general level of valuations of Shanghai-listed companies is relatively low, presenting obvious value investment opportunities.

Yes, “obvious” value opportunities.

Write your own jokes.