Shanghai, Shenzhen close higher after Spring Festival

New energy firms may shine as mood buoyant on recovery.

The Shanghai Composite Index climbed 0.14 percent to close at 3269.32 points while the Shenzhen Component Index gained 0.98 percent to close at 12097.76 points. The technology-focused ChiNext in Shenzhen closed 1.08 percent higher.

The number of tourists in the Spring Festival holidaySpring Festival holiday was 89 percent of the pre-COVID level, according to the latest data. The impact of the epidemic on the economy, society and markets has been largely mitigated, said CITIC Securities co-chief strategist, Qiu Xiang. He said that the Hong Kong market's performance over the past week has indicated investors' confidence in China's economic recovery.

The Hang Seng Tech Index, which is a large number of Chinese mainland technology companies listed, surged by 5.35 percent when it traded on Jan 26 and 27 during the Spring Festival holidaySpring Festival holiday.

A-share market recovery can be predicted, given the current level of adequate liquidity, said Qiu. He said that industries that have faster growth rates, including healthcare and digital economy, will be more highly pursued by investors.

Offshore China assets rallied from Jan 23 to Jan 27, a period when A-share trading was suspended for the Spring Festival holidaySpring Festival holiday.

The Nasdaq Golden Dragon China Index, a tracker of US-listed Chinese companies, jumped 4.79 percent during the period. The main contracts of the FTSE China A 50 index futures, which track the Shanghai and Shenzhen listed companies, reported price gains for five consecutive days and rose nearly 3 percent in all.

Yang Delong, chief economist at First Seafront Fund, said there was a huge rise in China assets in overseas markets during the Spring Festival holidaySpring Festival holiday, showing a high probability of a bullish A-share market after the holiday.

Market observers believe that the spring rally seems to have started at the beginning of the year, thanks to the central regulators' resolve to stabilize market confidence and China's on-track economic recovery. The upward momentum is expected to continue over the next few months, with consumption, new energy and technology companies leading the market rebound, Yang said.

Foreign institutions are positive about the future performance of the A-share market. After the Spring Festival, Goldman Sachs analysts said they hold an optimistic attitude towards the A-share market performance. According to a report released on January 27, they said that seasonal reasons, supporting policies and companies' improving profitability will all drive up the indexes.

The Chinese stock targets have been upgraded by the US investment bank for the third time in two months. It raised its year-end target for the MSCI China Index to 85 from 80 and the CSI 300 Index to 4,800 from 4,500.

Since November, the Chinese stock prices have rebounded sharply, but they remain relatively neutral, said Julien Holtz, emerging markets strategist at Pictet Wealth Management, a Swiss firm. We think there is room for further expansion, if not an overshoot.