CHINA’S stock market clawed its way from the bottom of the major global index rankings toward the top last year, with a 36 percent jump in the main blue chip index to trump the roaring rally in its Wall Street counterparts.

Investors had largely shrugged off the economic damage caused by the Sino-U.S. trade spat and were chasing consumer and technology stocks, encouraged by China’s stimulus and capital market reforms.

China’s blue-chip CSI300 Index ended the last session of 2019 at an eight-month closing high of 4,096.58 points, up 36.1 percent from the start of the year. The Shanghai Composite Index gained 22.3 percent last year, closing Tuesday at 3,050.12 points.

The S&P 500 gained 28.5 percent, its best showing since 2013, Dow Jones Industrial Average was up 22.01 percent and the Nasdaq advanced 35 percent.

“At the end of 2018, investors were dumping stocks amid fears of an unprecedented trade war. Today, investors are more composed, knowing all the cards Washington has, and more confident of the Chinese Government’s countermeasures,” said Wu Kan, head of equity trading at Shanghai-based Shanshan Finance.

But Wu cautioned there are already signs of overheating in some sectors, such as consumer and tech, predicting volatility in 2020.

U.S. President Donald Trump formally launched a tariff war with China in 2018, leaving its stocks down 25 percent that year, the worst performance among major markets.

But China’s CSI300 rebounded 28.6 percent in the first quarter of 2019, as investors pounced onto battered shares while the United States and China moved toward a ceasefire.

That rally stalled in early May after trade talks hit a wall, with Chinese stocks fluctuating in a relatively narrow range amid on-and-off trade negotiations.

The market resumed its climb last month, gaining more than 6 percent, as both sides agreed on an interim trade deal.

Although China’s economy grew at its weakest pace in three decades last year, investors were encouraged by China’s stimulus measures, market reforms and foreign inflows.

“The sharp correction in 2018 pushed valuations of China stocks to record lows, prompting a recovery in 2019, as the government rolled out supportive measures to boost the economy,” said Zhou Longgang, an analyst with Hua- chuang Securities.

China suspended a deleveraging campaign that spooked investors in 2018 and started easing monetary policy moderately. The government also stepped up fiscal spending on infrastructure.

China’s stock market also benefited from a slew of measures to reform the stock market, including the launch of the Nasdaq-style STAR Market in Shanghai, and the inclusion of A shares into global benchmarks by index publishers such as MSCI and FTSE Russell.

By the end of September, foreign investors held a record 1.77 trillion yuan (US$253.14 billion) in Chinese equities, up nearly 40 percent in a year, the latest data from the People’s Bank of China showed.

“China’s market reforms have boosted market confidence,” said Yang Tingwu, vice general manager of hedge fund house Tongheng Investment.

But performance has diverged sharply.

Tech shares surged more than 60 percent as China vowed to boost technology self-reliance, while an index tracking consumer staple stocks jumped about 80 percent on government stimulus measures.

In contrast, cyclical sectors including resources and energy underperformed the broader market.

Also lagging the wider China rally was Hong Kong’s stock benchmark Hang Seng, which rose 9.1 percent in 2019, hurt by the city’s ongoing protests. The index fell 0.5 percent to 28,189.75 points Tuesday in a half-day trading session.

(SD-Agencies)