Terrible Trade Numbers Just Sent Shanghai Stocks Through The Roof Again

Shanghai stocks accelerated again in trading on Monday, climbing another 2.82%.

That's despite, or maybe even because of some bleak trade figures coming out of China: exports rose 4.7% in the year to November, which is pretty sluggish by Chinese standards, and imports fell by 6.7%, indicating a bit of a slump in domestic demand.

Here's that dramatic boom in Shanghai stocks:

The reason that poor trade data and other signs of an economic slowdown might send stocks up is because investors will expect more interest rate cuts and easing from the People's Bank of China. That would cut the debt-servicing and raising costs for big listed companies, and typically would be good news for stock prices.

The Shanghai Composite is now up by an astonishing 48.7% in the last six months alone: just one more similar-sized rally will push that over 50% before the year ends.

That's not the end, according to Morgan Stanley. They're forecasting that a "secular bull market" is back in China, "and probably in a big way". Though they say there's a chance of a 28% drop by the end of 2015 in their most pessimistic scenario, their most optimistic forecast would mean gains of 453%.

Morgan Stanley

China's regulators are perhaps not quite so optimistic. Last week a spokesman warned investors to "invest rationally, respect the market, fear the market, and bear in mind the risks present."