(Bloomberg) -- Stock traders had braced themselves for an unusually busy session when China’s mainland markets reopened on Tuesday after the Golden Week holiday. But few were prepared for the action that kicked off right at the opening bell.
“It’s absolutely going nuts today,” said Liying Wang, director at a local stock brokerage firm in the southern city of Chengdu, who started working in the industry in 1994.
Her brokerage floor was packed with people rushing to open new accounts, many of whom were born in the late 1990s and early 2000s, and with little patience to wait.
The frenzied trading sent China’s CSI 300 Index soaring 11% at the open, only for the gains to more than halve within an hour. Over in Hong Kong small losses quickly turned into a 10% plunge, the worst since 2008. Turnover in both markets surged to the highest ever. Brokerages saw their trading apps freeze temporarily due to a rush of orders.
Analysts said the wild swings were partly triggered by a rotation play as investors switched out of Hong Kong equities into Chinese shares after the week-long break. The moves were amplified by traders’ disappointment after a briefing by China’s top economic planner yielded little by way of fresh stimulus details.
To some observers, the speed at which Chinese shares retraced their gains on Tuesday suggests their recent rebound is already on its last legs. Several market watchers have drawn parallels between the latest rally and similar episodes in 2015 and 1999, when a boom in stocks was quickly followed by a bust.
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“Most traders were expecting some form of profit taking in Hong Kong at some point after a 30% rally, but the size of the move was still crazy,” said Wong Kok Hoong, head of institutional equities sales trading at Maybank Securities Pte. There is a growing concern among traders that “as with all recent rallies in Chinese stocks, this too shall fizzle out.”
Some caution that valuations are starting to look stretched. The CSI 300 Index is trading at 13 times forward earnings, above its five-year average.
Tuesday’s session saw turnover in Shanghai and Shenzhen jump to an unprecedented 3.43 trillion yuan ($486 billion). That exceeds the level seen on Sept. 30 when the onshore benchmark capped its biggest one-day surge since 2008. Trading in Hong Kong ballooned to HK$620 billion.
For Wang Dongpeng, it was the perfect opportunity to make a quick buck.
The 35-year old made a pit stop during a road trip in Guangzhou to sell almost half his stock holdings when the onshore benchmark gauge soared over 10% at the open. He dived back in to buy when the gains pared to around 2%.
“Because things are so volatile and the intraday move is so large, this is the opportunity to make short-term trades,” said Wang, who works for an export business in the eastern city of Xiamen.
Regardless of whether the rally sustains in the longer term, some market watchers are anticipating more gains for now.
“We see money coming from, I would say, all directions probably the whole week,” Yi Shen, founder and CEO of Shanghai Shenyi Investment, said in a Bloomberg TV interview on Tuesday. “This week we’ll see cash inflows in a big number.”
--With assistance from Winnie Hsu and Sangmi Cha.
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