(Bloomberg) -- A gauge of Shanghai-listed stocks is set for its highest close in a decade, as cash-rich local investors plow into a market that has surged amid easing trade tensions with the US.

The Shanghai Stock Exchange Composite Index jumped as much as 1.2% on Monday, putting it on course for its highest finish since August 2015, according to Bloomberg-compiled data. That cements a roughly 20% turnaround since an April selloff, when US President Donald Trump’s sweeping tariffs roiled global markets. Trump extended a tariff truce with China last week.

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The rally reflects a rising sense of optimism among small investors, flush with near record-high savings and increasingly rotating out of bonds. Those investors were scarred a decade ago, when a precipitous stock market crash led Beijing to unleash state-backed funds to prop up share prices and left a bitter memory for many investors.

There have been false dawns since then, but over the past decade Chinese stocks onshore have badly underperformed benchmarks of shares in the US, Asia and even Europe, long considered a global laggard for equity investors. Fund managers in China are now hoping that the current rally has enough behind it — ranging from hopes about artificial intelligence to government moves to bolster growth — to stand the test of time.

“We’re confident that this rally has legs,” said Wang Huan, a fund manager at Shanghai Zige Investment Management Co. Ltd, pointing to sources of optimism including abundant liquidity, government moves to stem price wars and hopes that China’s economy is bottoming out.

China’s stock market has been helped by investors shifting their investments from fixed income, as they scale back expectations of monetary easing and respond to Beijing’s decision to restart taxes on interest payments made on government bonds or those of financial institutions. China’s 10-year bond yield was up three basis points at 1.78% on Monday, while 30-year yields were around five basis points higher at 2.1%.

The Shanghai Composite remains a long way from the heady days of 2015, when a leverage-induced buying spree pushed the index as high as 5,166 before the bubble burst. The all-time high was set in October 2007.

Trade Tensions Ease

The buzz in China’s share market is a stark change from just a few months ago, when fears that the world’s two largest economies were entering a prolonged — and painful — trade war rattled markets around the world. The rally is part of a global rise in share prices: Stocks in the US and Indonesia set new highs last week, helping push an MSCI index of global equities to a record.

The recovery in China’s stock market has led to a frenzy of trading activity. Turnover on mainland exchanges broke 2 trillion yuan ($278 billion) last Wednesday for the first time since February, according to Bloomberg-compiled data. Meanwhile, mainland Chinese traders bought a record HK$35.9 billion ($4.6 billion) worth of stocks in Hong Kong on Friday, as the risk-on mood in mainland equities spilled over across the border.

There has also been a surge in loans for stock purchases, a sign that investors are taking on leverage to join the rally. The amount of margin debt taken out to buy stocks climbed to the highest level since 2015 last week, and is now about 10% away from hitting an all-time high.

Other policy tweaks have helped direct investors to local stocks. China strengthened its oversight of taxes on overseas stock trading gains, and said it will subsidize interest payments on eligible personal consumer loans.

The Shanghai index’s 12% gain this year has beaten the CSI 300 Index, another closely watched onshore gauge which is up around 8%. A bigger weighting of high-performing bank stocks in the Shanghai Composite has helped drive the outperformance, in large part due to buying by insurance funds.

--With assistance from Julia Zhong.

(Updates throughout.)

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