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China’s stock surge has echoes of the 2015 bubble. What’s different

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A customer watches stock market at a stock exchange in Hangzhou, China, on September 27, 2024. 

Costfoto | Nurphoto | Getty Images

BEIJING — The rocket higher in Chinese stocks so far looks different from the market bubble in 2015, analysts said.

Major mainland China stock indexes surged by more than 8% Monday, extending a winning streak on the back of stimulus hopes. Trading volume on the Shanghai and Shenzhen stock exchanges hit 2.59 trillion yuan ($368.78 billion), surpassing a high of 2.37 trillion yuan on May 28, 2015, according to Wind Information.

Over six months from 2014 to 2015, the Chinese stock market doubled in value, while leverage climbed, Aaron Costello, regional head for Asia at Cambridge Associates, pointed out Monday.

This time around, the market hasn’t run up as much, while leverage is lower, he said. “We’re not in the danger zone yet.”

Stock market leverage by percentage and value were far higher in 2015 than data for Monday showed, according to Wind Information.

China is a short to medium-term trade, says Hightower's Stephanie Link

The Shanghai Composite in June 2015 soared past 5,100 points, a level it has never regained since a market plunge later that summer. MSCI that year delayed adding the mainland Chinese stocks to its globally tracked emerging markets index. Also hitting sentiment was Beijing’s back-and-forth on a crackdown on trading with borrowed funds and a surprise devaluation of the Chinese yuan against the U.S. dollar.

This year, the yuan is trading stronger against the greenback, while foreign institutional allocation to Chinese stocks has fallen to multi-year lows.

The Shanghai Composite closed at 3,336.5 on Monday, before mainland exchanges closed for a week-long holiday commemorating the 75th anniversary of the People’s Republic of China. Trading is set to resume on Oct. 8.

In the runup to the 2015 market rally, Chinese state media had encouraged stock market investment, while loose rules allowed people to buy stocks with borrowed funds. Beijing has long sought to build up its domestic stock market, which at roughly 30 years old is far younger than that of the U.S.

Strong policy signals

The latest market gains follow announcements in the last week of economic support and programs to encourage institutions to put more money into stocks. The news helped stocks rebound from roughly their lowest levels of the year. The CSI 300 rallied by nearly 16% in its best week since 2008.

Chinese President Xi Jinping on Thursday led a high-level meeting that called for halting the real estate market’s decline as well as strengthening fiscal and monetary policy. The People’s Bank of China last week also cut interest rates and the amount existing mortgage holders need to pay.

“The policy is much stronger and [more] concerted this time than 2015. That said, the economy faces greater headwind[s] right now compared to back then,” said Zhu Ning, author of “China’s Guaranteed Bubble.”

One week of massive stock gains do not mean the economy is on its way to a similar recovery.

The CSI 300 remains more than 30% below its February 2021 high, a level that had even surpassed the index’s 2015 high.

“The Japanese experience provides an important perspective, as the Nikkei 225 Index bounced four times by an average of 34 per cent on its way to a 66 per cent cumulative drop from December 1989 to September 1998,” Stephen Roach, senior fellow at Yale Law School’s Paul Tsai China Center, pointed out Tuesday in a blog post that was also published in the Financial Times opinion section.

Economic data for the last few months have pointed to slower growth in retail sales and manufacturing. That raised concerns that China’s gross domestic product would not reach the full-year target of around 5% without additional stimulus.

“I think what’s missing is the key to a lot of this, that has not come out, which would be a truly confidence-boosting measure, is how are they going to fix the local government finances,” Costello said, noting local coffers once relied on land sales for revenue to spend on public services.

While Chinese authorities have cut interest rates and eased some home buying restrictions, the Ministry of Finance has yet to announce additional debt issuance to support growth.

Animal spirits at play

Peter Alexander, founder and managing director of Z-Ben Advisors, expects the level of fiscal stimulus — when it’s likely announced in late October — to be less than what markets are hoping for.

It “may have investors a little bit over their skis, as people like to say,” he said Monday on CNBC’s “Street Signs Asia.”

He added in a written response that his experiences in 2007 and 2015 indicate the Chinese stock market rally could last for another three to six months, or abruptly end.

“This is pure animal instincts and the Chinese have been pent up for a stock market rally,” Alexander said. He added that there are market risks from how unprepared the stock trading system was for the surge of buying.

Data on the number of new retail investors in China this year wasn’t publicly available. Reports indicate brokerages have been overwhelmed with new requests, echoing how individuals piled into the stock market nearly a decade earlier. The Shanghai Stock Exchange on Friday said confirming transactions at the market open had been abnormally slow.

Looking for earnings growth

“China was cheap and was missing the catalyst. … The catalyst has occurred to unlock the value,” Costello said.

“Fundamentally we need to see corporate earnings go up,” he said. “If that doesn’t go up, this is all a short-term pop.”

Beijing’s efforts earlier this year to stem a market rout included changing the head of the securities regulator. Stocks climbed, only to see the rally peter out in May.

A factor that can send stocks past May levels is that earnings per share forecasts have stabilized versus downgrades earlier this year, James Wang, head of China strategy at UBS Investment Bank Research, said in a note Monday.

Lower U.S. interest rates, a stronger Chinese yuan, increased share buybacks and more coordinated policymaker response also support gains, he said. Wang’s latest price target of $70 on the MSCI China index is now just a few cents above where it closed Monday.

— CNBC’s Hui Jie Lim contributed to this report.

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Treasury Secretary Bessent says market woes are more about tech stock sell-off than Trump’s tariffs

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Treasury Secretary Scott Bessent speaks to reporters outside the West Wing after doing a television interview on the North Lawn of the White House on March 13, 2025 in Washington, DC. 

Andrew Harnik | Getty Images

Treasury Secretary Scott Bessent said Wednesday the sell-off in the stock market is due more to a sharp pullback in the biggest technology stocks instead of the protectionist policies coming from the Trump administration.

“I’m trying to be Secretary of Treasury, not a market commentator. What I would point out is that especially the Nasdaq peaked on DeepSeek day so that’s a Mag 7 problem, not a MAGA problem,” Bessent said on Bloomberg TV Wednesday evening.

Bessent was referring to Chinese AI startup DeepSeek, whose new language models sparked a rout in U.S. technology stocks in late January. The emergence of DeepSeek’s highly competitive and potentially much cheaper models stoked doubts about the billions that the big U.S. tech companies are spending on AI.

The so-called Magnificent 7 stocks — Apple, Amazon, Tesla, Alphabet, Microsoft, Meta and Nvidia — started selling off drastically, pulling the tech-heavy Nasdaq Composite into correction territory. The tech-heavy benchmark is down about 13% from its record high reached on December 16.

However, the secretary downplayed the impact from President Donald Trump’s steep tariffs, which caught many investors off guard and fueled fears of a re-acceleration in inflation, slower economic growth and even a recession. Many investors have blamed the tariff rollout for driving the S&P 500 briefly into correction territory from its record reached in late February. Wall Street defines a correction as a drop of 10% from a recent high.

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S&P 500, YTD

Trump signed an aggressive “reciprocal tariff” policy at the White House Wednesday evening, slapping duties of at least 10% and even higher for some countries. The actions sparked a huge sell-off in the stock market overnight, with the S&P 500 futures declining nearly 4% and the blue-chip Dow Jones Industrial Average shedding 1,100 points. The losses will likely but the S&P 500 back into correction territory in Thursday’s session.

“It’s going to be fine if we put the best economic conditions in place,” Bessent said in a separate interview on Fox Wednesday evening. “If you go back and look, the stock market actually peaked on the [DeepSeek] Chinese AI announcement. So a lot of what we have seen has been just an idiosyncratic tech sell-off.”

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Conservative cable channel Newsmax shares plunge more than 70% after a dizzying 2-day surge

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A Newsmax booth broadcasts as attendees try out the guns on display at the National Rifle Association (NRA) annual convention in Houston, Texas, U.S. May 29, 2022. 

Callaghan O’hare | Reuters

Shares of conservative news channel Newsmax plunged more than 70% on Wednesday as its meteoric rise as a new public company proved to be short-lived.

The stock tumbled a whopping 72% in afternoon trading, following a 2,230% surge in Newsmax’s first two days of trading after debuting on the New York Stock Exchange. At one point, the rally gave the company a market capitalization of nearly $30 billion — surpassing the market cap of legacy media companies like Warner Bros. Discovery and Fox Corp.

Newsmax was listed on the NYSE via a so-called Regulation A offering, instead of a traditional IPO. Such an offering allows small companies to raise capital without undergoing the full SEC registration process. The primary focus is to sell to retail investors, in this case It was sold to approximately 30,000 retail investors. 

The public offering indeed garnered the attention from retail traders, some of whom touted the stock as the “New GME” in online chatrooms. GME refers to the meme stock GameStop, which made Wall Street history in 2021 by its speculative trading boom.

Newsmax has a small “float,” or shares available for trading. Less than 6% of Newsmax shares, or 7.5 million shares out of a total of 128 million fully diluted shares, are available for public trading.

The conservative TV news outlet has seen its ratings rise with the election of President Donald Trump and other prominent Republicans — although it still falls behind the dominant Fox News. Overall, Newsmax ranks in the top 20 among cable network average viewership in both prime time and daytime, Nielsen said.

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Stocks making the biggest moves midday: TSLA, DJT, AMZN, RIVN

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