China’s stocks recoup losses

Attempt to stabilise currency

CHINA’S stocks rose in volatile trading after the benchmark index briefly fell below the 3 000 level as policymakers intensified efforts to stabilise the yuan.

The Shanghai composite index added 0.2 percent to 3 022.86 points at the close, after losing as much as 1.3 percent. Technology and health-care shares led gains.

The People’s Bank of China repeatedly intervened in the offshore yuan market yesterday, according to people familiar with the matter, following efforts to talk up the currency from two senior government officials on Monday.

After three daily declines of at least 5 percent for the Shanghai index since the start of the year, its relative strength index has fallen to 27 as of Monday, the lowest level since August, and below the 30 threshold signifying oversold conditions.

Stocks gauge

The stocks gauge has slumped 15 percent this year, the world’s worst-performing global index, amid speculation policymakers will allow the yuan to weaken and the economic slowdown is deepening.

“I do not recommend investors to sell at this level,” Lu Wenjie, the equity strategist at UBS Group, said. “Typically, Chinese policymakers have room to mitigate risks and through such measures, valuations could come back quickly. Current market valuations are quite cheap. It has overly priced in risks.”

The Shanghai gauge trades at 11.8 times estimated 12month earnings, down from 19 times in June. The MSCI emerging markets index has a multiple of 10.3.

The yuan traded in Hong Kong 0.43 percent up to 6.5850 a dollar, according to prices compiled by Bloomberg. The currency in Shanghai advanced 0.11 percent to 6.5767, leaving a spread of 0.2 percent. That is compared with a record 2.9 percent reached last week.

Chinese officials have started to push back against views the nation’s currency is on a one-way weakening path.

Betting against the yuan would fail and calls for a large depreciation were “ridiculous” as policymakers were determined to ensure the currency’s stability, Han Jun, the deputy director of China’s office of the central leading group for financial and economic affairs, said at a briefing in New York on Monday.

Investors have misunderstood the PBoC’s (People’s Bank of China) intentions in its recent moves on the reference rate, according to Ma Jun, the chief economist at the central bank’s research bureau.

The fixings were based on the previous day’s closing price and changes to the basket of currencies against which the yuan was valued, Ma said.

The CSI 300 index rose 0.7 percent, led by technology and health-care stocks. Han’s Laser Technology Industry Group jumped 5.4 percent.

Beijing Tongrentang and Shanghai RAAS Blood Products both rallied more than 6 percent.

While the government helped boost stocks at least twice last week, according to people familiar with the matter, equities extended declines into the close on Monday. – Bloomberg

Officials have started to push back against views the currency is on a one-way weakening path.