Stock markets on the Chinese mainland have been surprisingly bullish recently, especially compared to other global markets. Since the launch of the Shanghai-Hong Kong Stock Connect program, the Shanghai Composite Index has already gained more than 30 percent, while the Hong Kong stock market has remained flat.
In my opinion, there are several reasons behind the robust performance of mainland stocks. First of all, the slump in crude oil prices has accelerated economic transformation on the Chinese mainland. The country's economy has greatly benefited from the oil price plunge, which has significantly eased imported inflation pressure.
Second, efforts to internationalize the renminbi are accelerating. With the currency's profile improving in the international market, equities on the mainland would have gotten a boost as well.
Third, given sharp drops in commodities and lackluster performances elsewhere in the global financial market, capital will naturally flow into assets that investors think will generate high returns. The A-share market is now looking like a strong target for global surplus capital.
