China’s $1.3-T Stock Surge Intensifies Debate About Its Fate

Chinese stocks capped another strong week of gains, fueling debate over the durability of a rally that has defied the nation’s economic troubles to add $1.3 trillion in market value this month, Abhisek Vishnoi and Winnie Hsu reported for Bloomberg News.

Bears point to overstretched technical indicators and elevated margin-financing levels.

Turnover in the onshore market climbed to a record as the benchmark CSI 300 Index rose in nine of the past 10 weeks.

That strength came despite cautionary messages from Chinese state media and efforts by some brokerages and fund managers to cool speculation.

Bullish investors argue authorities will continue to support sentiment ahead of the Sept. 3 military parade, which marks the 80th anniversary of the end of World War II. China has a history of propping up markets before major political events to project stability.

Bears, however, point to overstretched technical indicators and elevated margin-financing levels.

“Animal spirits have burst out in China’s market, with traders piling into everything from chips to Labubu,” said Hebe Chen, an analyst at Vantage Markets in Melbourne.

“The upcoming parade is fanning the frenzy, acting as a psychological safety net much like Chinese New Year or National Day, when authorities are expected to keep skies — and sentiment — clear.”

The relentless surge has divided Wall Street strategists. Goldman Sachs raised its CSI 300 target to reflect a potential 10% upside over 12 months, citing supportive valuations and favorable positioning.

Morgan Stanley, however, flagged early signs of overheating and cautioned that stronger corporate fundamentals and policy support will be needed to sustain the rally.