Shanghai stock market breaks 5,000-point level for first time in seven years on cash surge
Composite index closes above the 5,000-point mark for the first time in seven years as funds unlocked from IPOs pour back into the market
The Shanghai Composite Index yesterday closed above the 5,000-point level for the first time in more than seven years, boosted by a massive return of capital previously locked up in subscriptions for new share offerings.
The bullish sentiment on the mainland was also boosted by supportive comments from central government officials, who said the capital markets should embrace more start-ups and encourage private and foreign capital to play a more important role in financing.
The scale and speed of these gains scream ‘speculative bubble’
The Shanghai market had another volatile trading session, with the index shooting up 1 per cent on opening to breach 5,000 points for the first time since January 2008.
It then fluctuated at that level as investors moved out of large-cap bank and insurance stocks and flocked to cheaper railway and cement plays.
The index dropped as much as 1 per cent in the afternoon before closing the day up 1.54 per cent at 5,023.1 points, bringing the gain for the week to 8.92 per cent - the biggest since December last year.
The roller-coaster ride helped the index recover from a 6.5 per cent drop on May 28, when investors started questioning the sustainability of a bull run that started in the second half of last year given a widening gap between surging share prices and a slowing economy.
