Shanghai stocks jump 5.34% as US gains drive relief rally
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
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.
A Chinese investor monitors stock prices at a brokerage in Beijing on Thursday, Aug. 27.