Shang­hai stocks jump 5.34% as US gains drive re­lief rally

The China Post - - FRONT PAGE -

Shang­hai stocks closed up 5.34 per­cent on Thurs­day, cheered by a rally on Wall Street and a do­mes­tic in­ter­est rate cut this week aimed at boost­ing the world’s sec­ond-largest econ­omy, deal­ers said.

China’s bench­mark Shang­hai Com­pos­ite In­dex surged 156.30 points to 3,083.59 on turnover of 404.3 bil­lion yuan ( US$63.1 bil­lion).

It briefly dipped into neg­a­tive ter­ri­tory, fall­ing 0.71 per­cent, but fin­ished near the day’s high af­ter a late surge, halt­ing the steep­est five-day rout since 1996.

The Shen­zhen Com­pos­ite In­dex, which tracks stocks on China’s sec­ond ex­change, jumped 3.33 per­cent, or 56.45 points, to 1,752.21 on turnover of 361.0 bil­lion yuan.

“Heavy­weight stocks l i ke banks and in­sur­ance com­pa­nies helped pull up the (Shang­hai) in­dex, and it’s pos­si­bly China Se­cu­ri­ties Fi­nance en­ter­ing the mar­ket again to shore up stocks,” Zhang Gang, a strate­gist at Cen­tral China Se­cu­ri­ties in Shang­hai, told Bloomberg News.

Tokyo stocks closed up 1.08 per­cent, or 197.61 points, to fin­ish at 18,574.44, while Seoul gained 0.73 per­cent, or 13.91 points, to 1,908 and Syd­ney rose 1.17 per­cent, or 60.53 points, to 5,233.30.

Bei­jing launched a res­cue pack­age for shares af­ter a year­long rally col­lapsed in June, which has in­cluded fund­ing the China Se­cu­ri­ties Fi­nance Corp. to buy stocks on be­half of the gov­ern­ment.

Wall Street broke a six-day los­ing streak on Wed­nes­day af­ter hints the U.S. Fed­eral Re­serve would put off rais­ing in­ter­est rates sparked a rally fol­low­ing days of tur­moil over China.

The S&P 500 closed up 3.90 per­cent, the Dow added 3.95 per­cent, and the Nas­daq Com­pos­ite was up a heady 4.24 per­cent.

The gains came af­ter an in­flu­en­tial mem­ber of the U.S. Fed­eral Re­serve’s mon­e­tary pol­icy board said the im­pe­tus for a rate hike next month, as some had been pre­dict­ing, had faded amid the tur­moil grip­ping world mar­kets.

Hong Kong shares also jumped on Thurs­day with the bench­mark Hang Seng In­dex adding 3.60 per­cent, or 758.15 points, to close at 21,838.54 on turnover of HK$122.43 bil­lion ( US$15.80 bil­lion).

‘Ex­pect fur­ther volatil­ity’

China on Tues­day re­duced in­ter­est rates and cut the amount of money banks must hold in re­serve — its sec­ond such dou­ble move in two months — to try to bol­ster its econ­omy and end the coun­try’s worst stock mar­ket rout in al­most two decades.

But some an­a­lysts voiced cau­tion, say­ing trad­ing on China’s mar­kets would re­main choppy as a stock mar­ket bub­ble de­flates.

“In­vestors should ex­pect fur­ther volatil­ity,” Cather­ine Ye­ung, a Hong Kong-based in­vest­ment di­rec­tor for Fi­delity World­wide In­vest­ment, told Bloomberg News.

Shang­hai stocks closed down 1.27 per­cent in choppy trad­ing on Wed­nes­day, ex­tend­ing days of falls de­spite the rate cut.

An­a­lysts say the latest in­ter­est rate re­duc­tion — the fifth since Novem­ber — is not enough to re­verse slow­ing growth with more ag­gres­sive mea­sures re­quired.

Yuan Vs. Dol­lar set

at 4-Year Low

Main­land

China’s

cen­tral bank on Thurs­day set its daily ref­er­ence rate for the yuan cur­rency at a four- year low against the U. S. dol­lar, but it closed stronger than the pre­vi­ous day.

The yuan was fixed at 6.4085 to the green­back, ac­cord­ing to the China For­eign Ex­change Trade Sys­tem, just 0.07 per­cent weaker from the pre­vi­ous day. But it was the low­est since Au­gust 2011, the Shang­hai Se­cu­ri­ties News said on its web­site.

The yuan still ended the day at 6.4053 to the dol­lar, up from both Wed­nes­day’s close of 6.4095 and the ref­er­ence rate, also known as cen­tral par­ity.

The lower fix­ing fol­lowed an in­ter­est rate cut an­nounced on Tues­day.

The cen­tral bank on Aug. 11 de­val­ued the yuan by nearly 2 per­cent, say­ing the de­ci­sion was aimed at mov­ing to­wards a more flex­i­ble ex­change rate though the mar­ket in­ter­preted it as a sign of eco­nomic weak­ness. It fell fur­ther in the fol­low­ing days.

The yuan is re­stricted to trad­ing up or down 2 per­cent from the daily rate on the na­tional for­eign ex­change mar­ket.

Be­fore the Aug. 11 change, the cen­tral bank used to de­cide its daily yuan ref­er­ence rate by polling mar­ket- mak­ers, but now says it takes into con­sid­er­a­tion the pre­vi­ous day’s close, for­eign ex­change sup­ply and de­mand, and the rates of ma­jor cur­ren­cies.

The cen­tral bank in­jected 150 bil­lion yuan ( US$ 23 bil­lion) into the money mar­ket on Thurs­day, ac­cord­ing to a state­ment, amid re­cent tight liq­uid­ity.

AP

A Chi­nese in­vestor mon­i­tors stock prices at a bro­ker­age in Bei­jing on Thurs­day, Aug. 27.

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