China stocks jumped nearly 5 percent on Monday, regaining most of the ground lost in Thursday's sell-off, as investors sitting on growing piles of cash took advantage of that tumble to swoop on shares as a chorus of official media commentary asserted the bull market is not over yet. Most investors interpreted fresh official economic surveys as reinforcing expectations for more government stimulus, and were undeterred by a new wave of initial public offerings (IPOs) this week.
The largest of the IPOs is for China National Nuclear Power Co, which aims to raise $2.13 billion. "The pattern in a bull market is that immediately after a plunge, money will pile in, pushing the market higher," said Wang Yu, analyst at Pacific Securities Co in Beijing.
"To many investors, the rout last week means a huge reduction in market risks, creating buying opportunities," he said. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 4.9 percent, its biggest single-day gain in two and a half years, and pushed past 5,000, closing to 5,076.18.
The Shanghai Composite Index surged 4.7 percent, to 4,828.74 points, its biggest rise in more than four months. Hong Kong shares also were up on Monday, though the rise was far smaller, capped by Friday's sluggish US market after disappointing US economic data. Last Thursday, China's two main indexes both plummeted more than 6 percent. On Friday, they barely moved as investors were divided on the market's direction after the plunge.
Investors were comfortable with the official manufacturing Purchasing Managers' Index (PMI), which showed growth in China's giant factory sector edged up to a six-month high in May although export demand continued to shrink. They also welcomed rhetoric from the central bank, which said on Friday it wants to see a "healthy" stock market, plus front-page articles in major official newspapers saying the pillars of the bull market - monetary easing and economic restructuring - remain in place.
China's bull run has generated excitement among cash-rich investors on the mainland. According to data compiled by Shanghai-based fund consultancy Z-Ben Advisors, Chinese mutual funds raised roughly 300 billion yuan ($48.42 billion) last month, 15 times more than a year earlier. That made May the best month to date for the industry in terms of fundraising. And during the first five months, Chinese mutual funds raised over 800 billion yuan, double the 407 billion yuan raised during all of 2014, a further indication the bull run hasn't run out of fuel. Pharmaceutical stocks surged on Monday, as investors bet some drug makers will benefit from growing concern over the Middle East Respiratory Syndrome (MERS).
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