Chinese markets take the risk that traders bet big on stimulation

Chinese financial markets are rediscovering an unparalleled risk appetite for months, inspiring the government's biggest push to boost the slowdown this year

The CSI 300 Continental Equity Index soared 1.6% on Tuesday. Three-day gain since mid-August 2016, when economic indicators confirmed China's efforts to stabilize a slowdown at the time. Although there is no guarantee of success this time, with the X factor of a trade dispute with the United States at stake, traders are betting big.

The yuan fell Tuesday to the weakest in more than a year against the dollar, a day after a record injection of financing to lenders by the People's Bank of China. And 10-year government bond yields rebounded from their lows since April of last year.

These movements could herald the end of bearish sentiment that has been shaking Chinese markets for months. Investors fled the equities and bonded themselves, frightened by a deleveraging campaign that contributed to a record number of corporate failures and a decline in public investment. The outlook for US tariff increases on a growing share of Chinese exports has not helped. "This is a concrete sign of coordinated stimulus and one of the key factors weighing on Chinese markets," said Aidan Yao, senior economist at AXA Investment. Asia Ltd. in Hong Kong. "Fiscal and Monetary Authorities Provide Cash to Support the Economy For markets last week has really reduced domestic risks."

Among the measures taken by policy makers who encourage traders:

• ] A statement from the State Council Monday that tax policy should be " more proactive." 19659010] The PBOC's offer of 502 billion yuan ($ 74 billion) in loans from A year to banks on Monday, greater use of the medium-term loan facility since its launch in 2014.
• easing the implementation of the more stringent regulation of wealth management products [19659011] that had fueled the shadow banking sector.
• Guo Shuqing, head of China's Banking and Insurance Regulator summoned leaders of the country's largest banks on July 17 and urged them to take the initiative to revive loans, especially to small and micro enterprises.

Banking stocks were among the biggest beneficiaries of the current recovery, rising by 6.5% in three days for their best performance in almost two years. Industrial companies – a group that would benefit from infrastructure projects – climbed 3% Tuesday, their strongest rally since May 2016. Materials stocks also recovered.

The CSI 300 experienced a big turnaround a low of 14 months. Even the forecast of the best earnings growth in eight years was not enough to attract buyers.