The mainland Chinese stock market rallied Monday, clocking its best gains in five months, despite dismal economic news.
It's pretty simple. The Hong Kong market reacts to economic news. The mainland China market reacts to news and rumors of additional stimulus.
The economic news was uniformly disappointing. The producer price Index, an indicator of inflation—and demand for goods at the wholesale level—hit a better than five-year low.
On trade, exports were down 8.3 percent in July compared to the same period a year ago, while imports were down 8.1 percent, now down nine months in a row.
But the Shanghai and Shenzhen markets rallied, largely on speculation even more stimulus would be coming.
They're probably right. A number of reports have suggested the government would be getting even more involved in owning stocks. Apparently the government will be creating at least two additional sovereign wealth funds that will buy state-owned enterprises (SOEs) and use their ownership to improve their financials.