Photo: GT

Chinese mainland shares rocketed on Monday, turning in the benchmark Shanghai Composite Index's biggest one-day gain in five years, as a continued surge in securities stocks ignites investor confidence for the start of a bull run in the world's second-largest economy.

The economy's resilience despite earlier COVID-19 assault also underpins hopes of a bull market, analysts said.

The Shanghai benchmark soared 5.71 percent to finish at 3,332.88 points, highest since March 2018. About 95 percent of stocks traded on Chinese mainland bourses ended up. The Shenzhen Component Index rallied 4.09 percent while the tech-heavy ChiNext index gained 2.72 percent. 

Securities shares led Monday's surge, despite statements by the nation's two biggest brokerages - Citic Securities Co and CSC Financial Co - which refuted market rumors that they are in talks for a merger that intends to create an investment banking behemoth in China to take on their Western counterparts.

As of Monday's close, the Shanghai stock index had shot up over 20 percent from its pandemic lows in late March, suggesting it has entered bullish territory in technical terms.

The announcement by China Securities Finance Corp Friday that expands the pool of funds available for margin financing loan services added fuel to confidence that a bull run nears.

Semiconductor shares also held up as Hong Kong-listed chip-making major Semiconductor Manufacturing International Corp (SMIC) will return to the A-share market this month. 

The rare frenzy in the A-share market fed through the Hong Kong stock market, with the Hang Seng Index rallying 3.81 percent, or nearly 1,000 points, to end at 26,339.16 points Monday, its highest in four months.

The latest rally is likely to continue on the grounds that the mainland market has not followed in the steps of its overseas counterparts that have rallied significantly in the past months, Lu Zhengwei, chief economist at Industrial Bank Co in Shanghai, told the Global Times on Monday. 

Monetary policy easing by central banks the world over has facilitated an equity boom. Meanwhile, the positive effect of the monetary easing is evident, which added to an economic rebound, laid the groundwork for the current rally, Lu said. 

The upswing will not be short-lived although  fluctuations are inevitable, he said, noting that margin trading remains well under control and that a flurry of efforts has been taken to improve investor protection and enhance corporate governance of listed firms. 

This would bode well for the broader economy, as businesses become more accessible to fundraising at lower costs, the economist stressed. 

Trading volumes on mainland bourses hit nearly 1.6 trillion yuan ($227.44 billion) on Monday, the highest in five years. The total capitalization of China's A-share market hit $10 trillion on Monday, the first time since June 2015 when the market was hit by a rout.

Expressing optimism about the outlook for the economy for the remainder of the year, Ji Tianhe, the China head of foreign exchange and local markets strategy at BNP Paribas in Beijing, told the Global Times that there are chances of upward revisions to the full-year growth forecast. 

BNP Paribas put China's GDP growth at 2.6 percent for the whole of 2020.

A revival in consumption is well underway, Ji said, citing the country's stock market spiraling upward against bullish sentiment prevailing across the globe. 

Growth in China's exports tends to beat expectations, as a push to print money in developed economies is likely to create purchasing powers and render buyers less price-sensitive, he said, as well as creating a stronger-than-expected rebound in exports to underpin China's economic reboot. 

The roaring market over the past few trading sessions has reportedly lured streams of new investors, especially younger ones born after the 1990s, to open stock trading accounts.

Having just opened a stock account on Monday, Shen Qing, a Beijing-based white-collar worker in her late 20s, said she is thrilled to start a journey in the China's stock market. "I'm thinking about investing 50,000 yuan ($7,095) today, and will put more if it runs well," Shen said.

"The stock market seems so promising, promising than any other investment channel, and I'm encouraging my parents to put their savings into the stock market," Shen said.