BEIJING: China shares logged two consecutive weeks of gains for the first time since August, as investors ramp up borrowing to buy stocks and expectations build for more government stimulus.
The Shanghai Composite SHCOMP, +1.60% finished up 6.5% this week, gaining 14.7% from the nadir of its recent selloff on Aug. 26. Hong Kong’s Hang Seng Index HSI, +0.78% is on track for its third straight week of gains, up 2.5% this week and 13% since its late September low through Thursday.
On Friday, the Shanghai Composite Index closed up 1.6%, and the Hang Seng Index gained 0.6%.
Hopes for stimulus in Japan are lifting shares there, too, with the Nikkei NIK, +1.08% closing up 1.1%, to 18,291.80, near its highest levels in a month. Australia’s S&P/ASX 200 XJO, +0.73% finished up 0.7%.
Local Chinese investors have regained some of their appetite for stocks after a bruising summer selloff knocked trillions in value from Chinese equities. Outstanding margin loans on the mainland, mostly from brokerages, edged up 5% this week through Thursday, on track for the biggest weekly increase since April, according to database Wind Information Co. Margin debt increased 7% so far in October through Thursday.
Expectations for government stimulus have lured Chinese investors back to the market, leading to a higher tolerance for risk and uptick in margin lending, according to Xiao Shijun, an analyst at Guodu Securities.
Borrowing to buy stocks helped fuel a yearlong rally that roughly doubled Shanghai’s value through June. But the practice also exacerbated losses as investors rushed to cover their positions during the selling. At 96.1 billion yuan ($15.1 billion), loans still remain down 57% from a record 2.27 trillion yuan in June.
Shares of tech firms like Hithink Royal Flush Information Network Co. and Nanfeng Ventilator Co. have bounced more than 50% in the past month on Shenzhen’s trading board for start-ups. The ChiNext Price Index, a benchmark for these stocks, has surged more than 35% from its bottom on Sept. 15. ChiNext shares were among the most overheated during the rally, tripling in value from the beginning of the year to June.
