Dalian iron ore futures have now taken off and are 4% limit up on the day. Miners are still in the doldrums here.
There’s no specific reason for the takeoff but it’s worth noting that in recent weeks the Chinese stock market, the Shanghai Composite, has been melting up:
Morgan Stanley has gone full retard on the rally, from Bloomie:
The Shanghai Composite Index (SHCOMP)’s advance to a three-year high today extended its gain over the past month to 14 percent, trouncing all 92 of the world’s other benchmark equity indexes by at least six percentage points. Mainland investors are opening stockaccounts at the fastest pace in three years, trading in Shanghaisurged above 500 billion yuan ($81.3 billion) today for the first time and initial public offerings have returned an average 180 percent in 2014.
Central bank efforts to bolster China’s economic growth are reviving optimism in the $4.6 trillion stock market after the Shanghai Composite lost more value than any other major benchmark index worldwide in the past five years. While exchange-traded fund investors are paring holdings on concern the gains won’t last, Morgan Stanley (MS) says there’s potential for an “ultra-bull” rally where share prices double in 18 months.
“New account openings are a sign that there is fundamental investor participation,” said Jonathan Garner, the Hong Kong-based head ofAsia and emerging-market strategy at Morgan Stanley who predicted in June that monetary stimulus would drive a second-half rally in Chinese shares. “Moves on high volumes should always be taken seriously.”
Garner says his ultra-bull scenario is predicated on low returns for investment alternatives such as real estate, a “soft landing” forChina’s economy and a transition to a growth model geared toward domestic consumption and services. Investors should favor “new economy” industries such as health care and technology, along with financial stocks, Garner said in a phone interview yesterday.
…Individual investors in China are adding to their stock holdings, with some borrowing money to amplify their purchases on expectations the rally will continue, said Chen Xiaofei, an investment adviser at Changjiang Securities Co. in Shanghai.
“Our margin trading business has almost doubled,” Chen said. “Individual investors I’ve contacted think this is the beginning of a bull market and they are shifting money into stocks.”
It’ a good story and, with the rising yuan, attractive to an Australian investor.
Dalian has resisted this until now but may be being drawn in as property developers rally, even if its largely technical. Worth watching.
