(Bloomberg) -- Every bull market is unique, but the one in China right now looks downright strange.
The Shanghai Composite Index has climbed 24 percent from its January 2016 low, and yet a majority of stocks in the benchmark gauge have fallen during the period.
That’s a first for Shanghai bull markets since at least 2002, when Bloomberg began tracking the data. And it makes China a big global outlier.
For all 45 of the other national equity gauges that have climbed at least 20 percent since last January, a majority of index members have recorded gains. Even in the U.S., where some investors have bemoaned the S&P 500 Index’s reliance on a handful of surging tech shares, the ratio of advancers versus decliners is more than 5-to-1.
So what’s going on in Shanghai? In short, the market’s biggest companies are outperforming by an unusual degree -- propping up the benchmark gauge even as 724 of its 1,427 members post declines.
The divergence has been driven party by wagers that China’s largest companies are best positioned to weather slowing economic growth and rising borrowing costs.
But analysts say state intervention may also be playing a role. Equity purchases by government-linked funds helped fuel the Chinese market’s recovery from a $5 trillion crash in late 2015, and the so-called National Team is thought to have taken an active part in stabilizing share prices ever since. State funds get the most bang for their buck by purchasing index heavyweights like Industrial & Commercial Bank of China Ltd., the nation’s biggest lender and the top contributor to the Shanghai Composite’s bull-market gain.
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For Hao Hong, the Bocom International Holdings Co. strategist who predicted both the start and peak of China’s 2015 equity boom, this year’s lack of market breadth is a “very, very bearish signal.” He expects the Shanghai Composite, which has declined for four of the past five sessions, to trade at or below current levels for most of next year as expensive large-cap shares begin to lose their appeal.