Chinese stocks, yuan rebound

The Chinese financial market survived a roller coaster ride on Friday as Chinese stocks recovered sharply from a fiveday bear run, and the yuan bounced back from a one-year low.

China’s banking and insurance regulator late Friday released long-awaited draft rules to strengthen regulations on commercial bank wealth management businesses to fend off systemic financial risks.

The exchange rate of the yuan against the US dollar plunged to its lowest level in more than a year on Friday after the central bank fixed a weak midpoint, falling to as low as 6.8128 to the dollar in the onshore market, before settling at 6.790.

Chinese stocks bounced back after the yuan recovered, with the Shanghai Composite Index gaining 2.05 percent to 2,829.27 points on Friday.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Friday that several factors caused the market to perform the way it did on Friday, with the new policy on wealth management products (WMPs) easing market fears and uncertainty.

The regulator said WMPs should be managed based on their net value and banks must standardize the management of their fund pool to prevent shadow banking risks, an online statement said.

“Well-informed sources could have capitalized on the markets on Friday,” Li said.

He added that the US dollar is strengthening on its own in recent days but the fundamentals are underpinning the yuan from its current position, citing China’s ample foreign exchange surplus.