China to in­ter­vene in stocks ahead of an­nual pol­icy meet­ing

The Pak Banker - - MARKETS/SPORTS -

China in­ter­vened to sup­port its stock mar­ket on Fri­day, help­ing the bench­mark in­dex cap its best weekly gain of 2016 be­fore pol­icy mak­ers meet to ap­prove a five-year road map for the econ­omy, ac­cord­ing to two peo­ple with di­rect knowl­edge of the sit­u­a­tion.

State-backed funds bought pri­mar­ily bank shares, while some lo­cal branches of the se­cu­ri­ties reg­u­la­tor asked listed com­pa­nies, mu­tual funds and bro­ker­ages to sta­bi­lize the mar­ket dur­ing the Na­tional Peo­ple's Congress and the Chi­nese Peo­ple's Political Con­sul­ta­tive Con­fer­ence, said the peo­ple, who asked not to be named be­cause the mat­ter isn't pub­lic.

China's big­gest banks, seen as prime tar­gets for state sup­port be­cause of their large weight­ings in bench­mark in­dexes, paced gains in the $5.5 tril­lion mar­ket on Fri­day even as small-cap­i­tal­iza­tion shares tum­bled. Au­thor­i­ties have been known to in­ter­vene in mar­kets be­fore key na­tional events, with govern­ment funds step­ping in to boost share prices last Au­gust be­fore a mil­i­tary pa­rade cel­e­brat­ing the 70th an­niver­sary of the World War II vic­tory over Ja­pan.

"It looks like the na­tional team has been buy­ing as large caps of the Shang­hai in­dex jumped, while small caps fell," said Steve Wang, chief China econ­o­mist at Re­ori­ent Fi­nan­cial Mar­kets Ltd. in Hong Kong. China's stock mar­ket has be­come one of the most vis­i­ble sym­bols of anx­i­ety to­ward Asia's largest econ­omy af­ter a $5 tril­lion crash last sum­mer rat­tled global in­vestors. By pub­licly in­ter­ven­ing to sup­port equity prices in 2015, Pres­i­dent Xi Jin­ping's govern­ment has staked some of its cred­i­bil­ity as a stew­ard of the econ­omy on the state's abil­ity to sta­bi­lize one of the world's most volatile mar­kets.

The Shang­hai Com­pos­ite In­dex rose 0.5 per­cent on Fri­day, re­vers­ing an ear­lier de­cline of 1.8 per­cent and ex­tend­ing this week's gain to 3.9 per­cent. The large-cap CSI 300 In­dex ad­vanced 1.2 per­cent, while the ChiNext gauge of smaller com­pa­nies tum­bled 5 per­cent.

The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion didn't im­me­di­ately re­ply to a faxed re­quest for com­ment.

A gauge of fi­nan­cial stocks climbed the most among 10 in­dus­try groups. In­dus­trial & Com­mer­cial Bank of China Ltd., the most valu­able com­pany listed on main­land ex­changes, jumped 4.4 per­cent in its big­gest gain in four months.

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