00:00The Chinese stock market has hit a 10-year high.
00:04The benchmark Shanghai Composite Index rose nearly 1.5% on Friday to break through the 3,800-point mark.
00:11The tech-heavy Star 50 Index jumped more than 8.5%.
00:15While several Chinese semiconductor stocks rose to hit the 20% mark daily limit,
00:21as optimism grows that more chips used in China will be produced domestically.
00:26The A-share Chinese mainland market opened the week on a record $14 trillion,
00:32and it's been riding high since then.
00:34It's been driven by strong trading activity, improved investor sentiment, and steady capital inflows.
00:41While Fiona Sincotta is an analyst at Citi Index.
00:46We've seen some really impressive gains, as you mentioned, in the CSI.
00:49I mean, it's pushed 3.5% higher this week, marking the strongest weekly gain since November 2021.
00:57So, I think behind this, we're seeing really a lot of optimism surrounding China's homegrown tech sector.
01:03AI firm DeepSeek have announced or released their V3 AI model, which is supported by domestic semiconductors.
01:13So, a lot of optimism surrounding that.
01:16And we've seen the CSI, Semiconductor Index, is up some 9.5%.
01:22That's where we're seeing a lot of those gains come in, obviously, with AI stocks as well performing well.
01:28In addition to that sort of optimism surrounding semiconductors, the homegrown tech sector,
01:35we're also seeing that rotation really out of U.S. tech sector.
01:39So, I think that's playing into it as well.
01:42And then also, over in China, we're seeing that sort of rotation as well, out of bonds into stocks, which is helping the mood as well.
01:51And Fiona, there's been a bit of a divergence, hasn't there, between Chinese mainland stocks and the Hang Seng Index in Hong Kong.
01:57Why the difference?
01:58Yeah, so I think here what we're looking at is what really makes up these indices.
02:04And if we look at the Hang Seng, it's very much a broader index in the sense that it has real estate.
02:09We're looking at financials, whereas these gains have been very much highlighted or noted in the domestic semiconductor index and stocks,
02:22which we're seeing there in China.
02:23So, it's just to do with the broad makeup of the indices, and the Hang Seng is that much broader in its makeup.
02:30Yeah, and so remaining a bit flatter.
02:32Let's talk fintech and stablecoin-related stocks surged after reports, at least, of a policy shift in Beijing towards digital assets.
02:41How significant is this policy change for investor sentiment, Fiona?
02:44Really important, because it really does mark quite a pivotal point from that 2021 ban of cryptocurrencies.
02:51It does really suggest that we're seeing Beijing looking to modernize, looking to internationalize its currency through the use of stablecoins.
03:01I do think this is a really, really interesting development, one we should be watching closely,
03:06because it does also suggest that maybe we're seeing this move by Beijing looking to get more onto the international stage,
03:15which I think this is what it could be achieving, while still keeping control of its currencies.
03:22And there are always fears, aren't there, when there is a surge, then there's going to be a correction.
03:26Do you fear that things might be getting overheated?
03:28There is a potential for things to get hot.
03:31And, you know, often what we do see as well, though, when things run hot technically,
03:36so when we see charts move into what we call overbought territory,
03:39we can then see sort of more of a consolidation pattern where we just see a sort of softening out of that rally.
03:46But that doesn't necessarily mean that we have to see a complete crash afterwards.
03:50As I said, there are quite a few supportive factors behind this rally.
03:54So it's not necessarily running on hot air at all.
03:57And I think if the numbers from these semiconductor companies and AI start to support the run higher,
04:04then I think there is a potential for us to see this rally remain solid over the coming quarters.
Comments