To The Moon

The Chinese stock market has indeed been on a tear, with the Shanghai Composite Index hitting decade highs and the CSI 300 Index climbing over 20% from its yearly low, driven by record household savings, easing U.S.-China trade tensions, and government stimulus measures. But deciding whether to double down or take profits depends on a few key factors, and the picture isnt straightforward.

Reasons to Double Down:Valuations Still Attractive: Even after the rally, Chinese equities trade at relatively low multiples—around 11.4 times forward earnings for MSCI China, compared to the S&P 500’s much higher valuations. This suggests room for growth, especially if corporate earnings improve alongside government support for sectors like tech and consumption.

Policy Support: Beijing’s aggressive stimulus, including interest rate cuts and housing market support, signals a pro-market shift. The government’s focus on curbing price wars and boosting consumption could sustain momentum.

Retail Momentum: Chinese households, with over $22 trillion in savings, are pouring money into equities, driven by low deposit rates and FOMO. Retail investors dominate 90% of daily trading, which could keep pushing markets higher in the short term.

Technical Signals: Some analysts see the rally as a confirmed breakout, with potential upside to levels like 4,700 for the CSI 300 (6% above current levels) or even higher for certain ETFs.

Reasons to Take Profits:Volatility and Policy Risk: The Chinese market is notoriously policy-driven and volatile. The Shanghai Composite surged to 3,674 in October 2024 but dropped 11% in just 10 days. Past relief rallies have been “fast, furious, and short-lived” without sustained economic recovery.

Economic Headwinds: Structural issues like debt, deflation, and demographics persist. Youth unemployment hit 17.8% in July 2025, and the property sector remains shaky despite stimulus.

No one-size-fits-all answer here. If you’re bullish on China’s policy-driven recovery and can stomach volatility, holding or selectively adding to positions in undervalued sectors might pay off. But if you’re risk-averse or sitting on big gains, locking in some profits and diversifying makes sense.