Stocks rise again amid rescue bids
SHANGHAI: Chinese stocks surged for a second day yesterday as a government rescue plan offered a respite from a monthlong rout, but analysts warned of further uncertainty and volatility ahead.
The rally also provided some support to regional markets and commodities, which had earlier this week been hammered by fears about a spillover effect beyond the mainland.
The benchmark Shanghai Composite Index shot up 4.54%, or 168.47 points, to 3,877.80 on turnover of 680.4 billion yuan ($111.3 billion), taking its two-day rise over 10%.
In a roller-coaster week, the Shanghai market gained 5.18% overall, after the government announced additional policies to avoid a market crash.
But it is still down 24.9% from its closing peak on June 12.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, jumped 4.09%, or 79.91 points, to 2,035.26 on turnover of 247.3 billion yuan, still losing 3.01% over the week.
The government boost came after the Shanghai index plunged by almost a third in less than four weeks, wiping trillions of dollars from market capitalisation, spreading contagion in regional markets, and raising fears over the potential impact to the real economy.
The tide turned after the government launched a police crackdown on short-selling and banned big shareholders — those holding at least 5% stakes — and company executives from selling stock for the next six months.
After the market closed yesterday, the regulator said in a statement it had asked such individuals to increase their stakes and listed companies to buy back their own shares to stabilise prices.
“Market sentiment has definitely reversed significantly and started to stabilise, so it’s safe to say that the state’s measures have won initial success,” Phillip Securities analyst Chen Xingyu told AFP.
“However, there is still a chance for the market to see a second withdrawal (of funds) after big rises like this, but it won’t be as lasting and as deep as earlier plunges,” he said.
The stock market slide of recent weeks was a dramatic reversal of a 150% charge in the 12 months to its peak last month, fuelled by tens of millions of retail investors using borrowed funds.
Gu Luxian, who quit his banking job in March and now trades full time, remained cautious.
“The sharp rises these two days are just rebounds from previous big declines. The market won’t go too far up,” he told AFP.
Shanghai’s gains also helped boost other Asian markets. Hong Kong closed up 2.08%, adding to a near 4% advance in the previous session, while Sydney rose 0.38% and Seoul put on 0.17%.