Merger hopes drive Chinese stocks to new heights

China’s Shanghai Composite is at it again.

After a 0.5% correction last Friday the bargain hunters have moved in, driving the index up an eye-watering 3% on Monday.

While there have been rumours that China’s central bank may start to make direct purchases of local government debt – an unconventional policy measure if true – it appears expectations of widespread mergers between State-owned Enterprises (SoEs) in under-performing sectors, as reported by Reuters, is the latest catalyst to propel stocks higher.

As the table of the top index performers shows below it’s been a monumental day for construction, chemical, steel and shipbuilding firms.

With today’s gain the index is now up an amazing 40% since the beginning of the year.

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