(Bloomberg) -- Just weeks back, Chinese stock traders were looking at every excuse to sell. In a dramatic shift in sentiment, they are now latching onto the slightest signal of positive news.

Unverified social posts about a China reopening and a whiff of progress in Sino-American audit talks sent the market into an overdrive last week. On Wednesday, Beijing’s expansion of a financing support program spurred frenzied buying of property stocks even as authorities didn’t say how much aid is meant for developers.

Investors are citing reasons from dirt-cheap valuations to the sheer fatigue after a relentless rout that’s gone on for several quarters. At the heart of it all is the belief that China stocks are primed for a bull run once a trigger kicks in.

“It’s both really - the valuations and the market psychology,” said Justin Tang, head of Asian research at United First Partners. “Arguably, we are already at the point of maximum pessimism, which is fertile ground for a new bull rally.”

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Key Chinese stock gauges in Hong Kong and on the mainland have roared back in November after months of losses, as shares tied to reopening, tech and property have seen outsized upswings.

The rebound has been more pronounced in the nation’s Hong Kong-listed stocks, which suffered more during the long downturn. It’s a far cry from just about 10 days back -- when investors were counting their losses from a rout following President Xi Jinping’s power grab at the Communist Party Congress.

“After pricing in the worst possible scenarios, there’s plenty of money on the sidelines waiting for the slightest turn in expectations,” said You Lanqiang, founder of Pingtan Strategic Asset Management Co. “And when this is true, a rebound could quickly morph into a fear-of-missing-out frenzy.”

In fact, mainland investors have been scooping up Chinese stocks in Hong Kong for weeks on end, with their buying spree stretching to 24 straight sessions on Tuesday. 

Meanwhile, foreign investors have largely been sitting out and are net sellers of onshore China shares this month even as the benchmark CSI 300 Index is up 5.9%. Technical watchers, however, are taking heart from signs of an uptrend and risk appetite is partially returning as leverage trades pick up.

‘Don’t Want to Miss’

To be sure, there have been plenty of false dawns in recent months. And the surge that began last week with wild rumors over China’s potential Covid Zero exit is already fading as health officials stick to the policy amid rising virus cases.

The Hang Seng China Enterprises Index has lost 1.8% over the past two sessions, paring its November advance to about 12%. Still down almost 33% this year, the gauge is the second-biggest loser among more than 90 equity indexes tracked by Bloomberg globally.

“Specific to the recent rallies, I suspect that it is also a general view that the next big trade in Asia is a potential China recovery, whether that is from reopening or policy support in a meaningful way, so after an already painful year, investors really don’t want to miss this boat,” said Christina Woon, investment director for Asia equities at abrdn plc. 

“Being on the wrong side will really cost you,” she said. 

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