Looking for that ‘Two Sessions bump’ in the stock market? Best wait two weeks for the afterglow

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No big policy changes expected as China’s legislature starts its annual meetings in Beijing this weekend

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A brokerage in Beijing. The China stock market has only recorded one genuine ‘Two Sessions’ rally in the past five years, in 2015. Photo: Reuters

Zhang Shidongin Shanghai

Published: 8:00am, 3 Mar 2018Updated: 11:52am, 3 Mar 2018

If you are an investor watching out for that stock market bump from China’s annual legislative meetings, history has some insights to offer.

Since 2000, when Jiang Zemin was China’s head of state and Zhu Rongji was the premier, the benchmark Shanghai Composite Index has fallen in eight out of the 18 years during the annual legislative meetings, which take place in Beijing, falling 0.7 per cent on average during the period.

Two weeks after the closing ceremony of the National People’s Congress, however, the index has risen in 12 out of the 18 years, gaining 1.9 per cent on average.

“Investors usually have high policy expectations from the Two Sessions, but when they realise that their expectations are not being met or exceeded, they sell and, therefore, contribute to the weakness in the market,” says Wang Chen, a partner at XuFunds Investment Management in Shanghai. “The weak performance is most likely to continue this year.”

Policies such as financial deleveraging will rein in innovation and put the financial market “under close scrutiny”, he said.

Two Sessions

China’s bicameral legislature is expected to begin its annual meetings in the capital this weekend, in an annual ritual known as the “Two Sessions”. The Chinese People’s Political Consultative Conference, as the advisory body is called, begins meeting on Saturday, March 3, while the National People’s Congress, as the legislative body is called, begins meeting on Monday, March 5.