China's stock market has clawed its way from the bottom of the major global index rankings toward the top this year, with a 36% jump in the main blue-chip index set to trump the roaring rally in its Wall Street counterparts.
Investors have largely shrugged off the economic damage caused by the Sino-US trade war and are chasing consumer and technology stocks, encouraged by Beijing's stimulus and capital market reforms.
China's blue-chip CSI300 Index ended the last session of 2019 at an eight-month closing high of 4,096.58 points, up 36.1% from the start of the year. The Shanghai Composite Index gained 22.3% this year, closing the day at 3,050.12 points.
The S&P 500 has gained 28.5% and Dow Jones Industrial Average is up 22.01%.
"At the end of 2018, investors were dumping stocks amid fears of an unprecedented trade war. Today, investors are more composed, knowing all the cards Washington has, and more confident of the Chinese government's countermeasures," said Wu Kan, head of equity trading at Shanghai-based Shanshan Finance.
But Wu cautioned there are already signs of overheating in some sectors, such as consumer and tech, predicting volatility in 2020.
US President Donald Trump formally launched a tariff war with China in 2018, leaving its stocks down 25% that year, the worst performance among major markets.
But China's CSI300 rebounded 28.6% in the first quarter of 2019, as investors pounced onto battered shares while Washington and Beijing moved toward a ceasefire.
That rally stalled in early May after trade talks hit a wall, with Chinese stocks fluctuating in a relatively narrow range amid on-and-off trade negotiations.
The market resumed its climb this month, gaining more than 6%, as both sides agreed on an interim trade deal.
Although China's economy has grown at its weakest pace in three decades this year, investors were encouraged by Beijing's stimulus measures, market reforms, and foreign inflows.
"The sharp correction in 2018 pushed valuations of China stocks to record lows, prompting a recovery in 2019, as Beijing rolled out supportive measures to boost the economy," said Zhou Longgang, an analyst with Huachuang Securities.
China suspended a deleveraging campaign that spooked investors in 2018, and started easing monetary policy moderately. Beijing also stepped up fiscal spending on infrastructure.
The stock market also benefited from a slew of measures to reform China's stock market, including the launch of the Nasdaq-style STAR Market in Shanghai, and the inclusion of China A-shares into global benchmarks by index publishers such as MSCI and FTSE Russell.
By the end of September, foreign investors held a record 1.77 trillion yuan ($253.14 billion) in Chinese equities, up nearly 40% in a year, the latest data from the People's Bank of China showed.
"China's market reforms have boosted market confidence," said Yang Tingwu, vice general manager of hedge fund house Tongheng Investment.
But performance has diverged sharply.
Tech shares surged over 60% as Beijing vowed to boost technology self-reliance, while an index tracking consumer staple stocks jumped about 80% on government stimulus measures.
In contrast, cyclical sectors including resources and energy underperformed the broader market.
Also lagging the wider China rally was Hong Kong's stock benchmark Hang Seng, which rose 9.1% in 2019, hurt by the city's ongoing protests. The index fell 0.5% to 28,189.75 points on Tuesday in a half-day trading session.