(Bloomberg) — Chinese stocks extended their recent rapid climb, aided by an enthusiastic chorus from the nation’s influential state media.The CSI 300 Index jumped as much as 4.2% on Monday morning, the most since February 2019. That’s after it surged almost 7% last week. Turnover on the gauge was more than three times the average for this time of day. Brokerages led the gains after China International Capital Corp. hiked target prices for the industry, predicting the stock market will double in value in the next 5-10 years.A front-page editorial in the Securities Times on Monday said that fostering a “healthy” bull market after the pandemic is now more important to the economy than ever. The article pinned the accelerating gains on stock market reforms and excess global liquidity, while saying the struggle between the “world’s powers” underscores the importance of a mature financial market.China’s state media have long guided investors during key points in markets, whether talking up stocks or seeking to cool overheated speculation. While a strong domestic stock market would send a positive signal about China’s resilience to the coronavirus pandemic, as well as aid company fundraising, it also risks inviting bubbles — such as five years ago, when the equity market crashed after a debt-fueled rally.“The state is very cautious about creating another boom-bust as seen in 2015, realizing the harm to confidence that comes from the bust is greater than the good from the ride up,” said Wang Zhuo, fund manager at Shanghai Zhuozhu Investment Management Co. “We are still staying in the sectors we already hold, which are largely undervalued, because we profit from the alpha more than the beta in the market.”The CSI 300 is up 12% this year, the biggest gain among major global benchmarks, to trade at a five-year high. Its 14-day relative strength has climbed to 86, the highest since December 2014.Signs of investor exuberance are mounting, with daily turnover on the mainland surpassing 1 trillion yuan ($141 billion) on Thursday and Friday and heading for a similar level Monday, which would be the longest such run since March. Surging risk appetite has led to a rout in China’s sovereign bonds, with the yield on the 10-year note rising as much as 7 basis points Monday.The number of mainland commentaries and retweets containing the term “bull market” over the weekend was about more than 10 times the average over the past 90 days, according to the Baidu Index.In another illustration of sentiment, Semiconductor Manufacturing International Corp. is set to hold the mainland’s largest stock sale in a decade, as China’s top homegrown chipmaker raises capital while the U.S. tightens restrictions on technology sales to the nation. SMIC could sell as much as 53.2 billion yuan of shares, as it released offering details in a Sunday statement to the Shanghai Stock Exchange.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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