Changpeng Wan
Market Milestone Reached After Three-Year Wait
Shanghai’s benchmark index pierced the 3700-point barrier during morning trading on August 14, 2025 – a psychological threshold untouched since December 2021. This breakthrough followed an eight-session winning streak that lifted the index 3.8% since August 5. The Shanghai Composite ultimately closed at 3683.46 on August 13, its highest settlement since September 2021, before extending gains to 3700+ territory. This rally signals renewed investor confidence in Chinese equities after years of lackluster performance.
Technical and Psychological Significance
The 3700-level represents more than just a number. Historically, it served as:
– Resistance point during 2021’s market correction
– Key institutional rebalancing trigger
– Retail investor sentiment indicator
Anatomy of the Eight-Day Rally
Four interconnected drivers fueled this sustained advance:
Policy Tailwinds Intensify
Recent weeks saw coordinated stimulus:
– PBOC Governor Pan Gongsheng (潘功胜) oversaw 50-basis-point RRR cut
– State Council’s “National Nine Articles” boosted capital market reforms
– Targeted sector support for tech and green energy
Foreign Capital Inflows Accelerate
Northbound Stock Connect flows hit $2.8 billion weekly average – highest since Q1 2023. Global funds repositioned toward Chinese equities amid:
– Attractive valuations (SSE at 12.8x forward P/E)
– Weakening US dollar
Sector Leaders and Laggards
Performance dispersion revealed clear winners:
Financials Powered the Breakthrough
– Brokerages surged 9.2% collectively (CITIC Securities up 12%)
– Insurers gained 7.1% on policy dividend expectations
– ICBC and China Construction Bank added 5.3 billion yuan in market cap
Technology and consumer discretionary sectors underperformed, rising just 1.8% and 2.1% respectively during the rally period.
Historical Context: Beyond the 3700 Benchmark
The Shanghai Composite breaking 3700 evokes memories of previous bull cycles:
2021 Comparisons and Contrasts
Key differences from December 2021 peak:
| Factor | 2021 Peak | Current Rally |
|——–|———–|—————|
| Valuation | 16.2x P/E | 12.8x P/E |
| Margin Debt | 1.72 trln yuan | 1.38 trln yuan |
| Dominant Sector | Tech | Financials/Industrials |
Sustainability Analysis
Three critical factors will determine whether this rally extends:
Earnings Validation Required
With 63% of Shanghai-listed firms reporting H1 results by September:
– Minimum 8% YoY profit growth needed to justify valuations
– Industrial and materials sectors must deliver margin expansion
Strategic Implications for Investors
Portfolio Positioning Guidelines
Consider these tactical adjustments:
– Rebalance toward large-cap financials and infrastructure
– Maintain tech exposure through ETF diversification
– Hedge currency risk via offshore yuan futures
Monitoring Key Indicators
Critical signposts ahead:
– PBOC mid-term policy rate decisions (August 20)
– US-China tariff review (September 1)
– Property market transaction volumes
Market momentum appears intact following the Shanghai Composite breaking 3700, but disciplined risk management remains essential. Consult your financial advisor to align positions with revised growth expectations before the Q4 earnings window.
