China's major stock indices jump as 'slow bull' momentum builds

China's three major stock indices surged on Thursday, with the Shenzhen Component Index and ChiNext Index both hitting fresh year-to-date highs.

Analysts believe the A-share market is still in a "slow bull" phase, supported by a combination of favorable policies, steady domestic inflows and shifting global capital dynamics.

At the day's close, the Shanghai Composite Index advanced 1.65 percent to 3,875.31. The Shenzhen Component Index gained 3.36 percent to 12,979.89, while the ChiNext Index, which tracks China's Nasdaq-style board of growth enterprises, jumped 5.15 percent to 3,053.75.

The combined turnover on the Shanghai and Shenzhen bourses reached 2.44 trillion yuan ($342.6 billion), up 459.6 billion yuan ($64.52 billion) from the previous session. Gains were broad-based, led by electronic components, semiconductors, telecom equipment and electronic chemicals.

Brokerages highlighted two main drivers of the medium-term rally. First, China's policy support for stabilizing stock markets remains intact, with long-term institutional investors such as insurance funds and pension money continuing to channel capital into equities. Meanwhile, the shift in household asset allocation from low-yield savings into higher-return equities is still in its early stages, according to a report by Huaxi Securities, which means there is ample incremental capital waiting to be deployed into equities.

Second, global factors are also turning supportive. Expectations are mounting that the US Federal Reserve will cut interest rates, after August nonfarm payrolls rose by just 22,000 — well below market forecasts. Weaker US data is viewed as favorable for the RMB exchange rate and foreign inflows into Chinese assets, according to Huaxi Securities.

Data from the Institute of International Finance showed that emerging market portfolios recorded $44.8 billion in net inflows in August. China accounted for the lion's share, attracting $39 billion into its bond and equity markets. By contrast, emerging market equities outside China suffered a $7.4 billion outflow after three months of gains, while EM bonds outside China drew $13.2 billion.

Goldman Sachs research shows global hedge funds' net purchases of Chinese equities in August hit their highest level since September 2024, with gross positions in China reaching a two-year high.

Analysts believe the gradual rally in A-shares still has momentum, supported by steady domestic inflows and renewed optimism from foreign investors.