Chinese stock market beats Wall Street and FTSE by closing up in 2015

Shanghai stocks ended 2015 up nearly 10pc, beating Wall Street, the FTSE and most other major markets, and shaking off a savage summer rout.

The Shanghai Composite Index ended Thursday's session 0.9pc lower at 3,539.18 points, while China's blue-chip CSI300 index declined 0.9pc to 3,731.00 in thin volumes on the last day of year.

For the year, the Shanghai gauge advanced 9.4pc, capping a year of wild fluctuations that sent shock waves across global markets.

In comparison, the FTSE 100 is down around 4.7pc, while the S&P 500 index is up just 0.2pc. The Shanghai market has also outperformed most other major markets in Europe and Asia.

But the year in China was definitely not one for the faint-hearted.

An investor watches stocks fall on Black Monday

Fuelled by excessive leverage, the Shanghai market surged nearly 60pc early in the year before crashing in mid-June, wiping off about one-third of the market's value in just three weeks.

An unprecedented and often heavy-handed government rescue programme has helped prices rebound about 25pc from their August lows, but sentiment remains fragile heading into 2016.

A regulatory ban on large share sales that was imposed during the crash will expire in January.

While 2016 is expected to be another volatile year for China equities, some market watchers are expecting less drama, with Goldman Sachs expecting the trading pattern to be "fat and flat."

There are two major sources of concern haunting Chinese investors next year: when will the economy bottom out, and whether the market can withstand a potential equity supply glut as Beijing prepares to make company listings easier, and more market-oriented.

"It will not be a bull market next year, but the chance of a free fall is also slim," said Shen Weizheng, fund manager at Shanghai-based Ivy Capital.

The economy will remain fragile, but China's monetary easing would be limited by the rate hike cycle in the US. At the same time, Beijing needs a stable market to push capital markets reforms, he said.

Seven fund managers forecasted on average that the Shanghai Composite Index would climb to 3,728.6 points by the end of March, higher than the forecast made last month and about 5pc above the current level. Most of the fund managers expected that it would exceed 3,700 points.

Yuan devaluation

The Chinese yuan meanwhile is heading for a record yearly loss of 4.7pc against the dollar after further weakening this week, driven by the typical year-end increase in demand for US dollars in China's foreign exchange market.

The yuan traded close to the official mid-point rate of 6.4936 per dollar set by the People's Bank of China on Thursday, the weakest level since May 2011 and 0.1pc weaker than the previous fix of 6.4895.

Some traders forecast the Chinese currency could slip as far as 6.80 to the dollar by the end of 2016.

"China and the United States will continue their monetary policies' tones in 2016, which would boost the dollar and exert downward pressure on the yuan," said a dealer at an Asian bank in Shanghai.