Catenaa, Monday, August 18, 2025- China Shanghai Stock Index jumped 0.9% to close at 3,728 on Monday, its highest since August 2015, as local investors dumped bonds with easing trade tensions with the US.
This cements a 20% turnaround since an April selloff, when US President Donald Trump’s sweeping tariffs roiled global markets. Trump extended a tariff truce with China last week.
The rally reflects a rising sense of optimism among small investors, flush with near record-high savings and increasingly rotating out of bonds.
Those investors were scarred a decade ago, when a precipitous stock market crash led Beijing to unleash state-backed funds to prop up share prices and leaving a bitter memory for many investors.
There have been false dawns since then, but over the past decade, Chinese stocks onshore have badly underperformed benchmarks of shares in the US, Asia and even Europe, long considered a global laggard for equity investors.
Fund managers in China are now hoping that the current rally has enough behind it, ranging from hopes about artificial intelligence to government moves to bolster growth, to stand the test of time.
China’s stock market has been helped by investors shifting their investments from fixed income, as they scale back expectations of monetary easing and respond to Beijing’s decision to restart taxes on interest payments made on government bonds or those of financial institutions.
China’s 10-year bond yield was up four basis points at 1.78% on Monday, while 30-year yields were around six basis points higher at 2.11%.
The country’s 30-year bond futures suffered their biggest drop since March. The latest monetary policy report from China’s central bank showed policymakers are in no rush to aggressively ease.
The Shanghai Composite remains a long way from the heady days of 2015, when a leverage-induced buying spree pushed the index as high as 5,166 before the bubble burst. The all-time high was set in October 2007.
