China Stock Futures Rise as Shanghai Composite Approaches 4,000

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China’s stock-index futures rose, signaling further gains for the nation’s equities as the Shanghai Composite Index approached the 4,000 level for the first time since 2008.

Futures on the CSI 300 Index expiring in April, the most active contract, added 0.2 percent as of 9:18 a.m. local time. The Shanghai Composite surged 2.5 percent to 3,961.38 on Tuesday. The CSI 300 Index rose 2.2 percent. The Bloomberg China-US Equity Index added 0.7 percent in New York. Hong Kong’s stock market resumes trading today after a three-day holiday.

“Breaching the 4,000 level can be read by retail investors as a bullish signal,” said Gerry Alfonso, a director at the international business department of Shenwan Hongyuan Group Co.

The Shanghai gauge has jumped 92 percent over the past year, the best performing major global index among 93 measures tracked by Bloomberg, amid speculation the People’s Bank of China will further ease monetary policy after cutting interest rates twice since November and lowering reserve-requirement ratios of lenders once.

China will start to release March economic data on April 10, starting with inflation. Consumer prices probably rose 1.3 percent, slowing from a 1.4 percent gain in February, while producer prices may have declined 4.8 percent, unchanged from the previous month, according to the median estimate of a Bloomberg survey.

The Shanghai Composite is valued at 15.1 times 12-month projected earnings, compared with the five-year average multiple of 10.2, according to data compiled by Bloomberg. Its relative-strength index, measuring how rapidly prices have advanced or dropped during a specified time period, was above 70 for a 16th day on Tuesday, signaling shares may be poised to fall.

Tech Bubble

A world-beating surge in Chinese technology stocks is making the heady days of the dot-com bubble look almost tame by comparison.

The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156.

“Chinese technology stocks do resemble the dot-com bubble,” Vincent Chan, the Hong Kong-based head of China research at Credit Suisse Group AG, Switzerland’s second-biggest bank, said in an interview on April 2. “Given stocks fell 50 to 70 percent when that bubble burst in 2000, these small-cap Chinese shares may face big corrections when this one deflates.”

— With assistance by Shidong Zhang

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