Chinese stocks rise after Beijing moves to prop up market

Following weeks of steep losses, Chinese stocks rallied yesterday as a host of measures from the Beijing government to prop up the market appeared to ease rattled investor nerves.

The benchmark Shanghai Composite Index closed 5.76 per cent higher, its biggest daily rise in six years, at 3,709.33 points. The index has fallen by more than 30 per cent since mid-June. The Shenzhen index rose 4.25 per cent to close at 11,510.34 points, while the ChiNext Index, which tracks China’s board of growth enterprises, climbed 3.03 per cent to end at 2,435.76 points.

Market players are now holding their breath to see if yesterday’s rebound was a “dead cat bounce” or a signal that the bull run can continue, albeit at a less frantic pace.

Research group Central China Securities said the index leap was a sign of recovering investor confidence, but there would still be fluctuation in coming weeks.

More than 30 per cent of the value of Chinese shares has been wiped out since mid-June, nearly €3 trillion worth of losses, or more than 12 times as much as Greek’s total foreign debt. Rising stock prices ended on June 12th, as the market was driven lower by restrictions on margin trading, concerns about overvaluations, and fears of further losses. At least 1,400 firms have halted trading in their stocks to prevent the value of their businesses falling further.

Ease pressure

To ease pressure on the markets, the government has suspended new share offerings and brokerages have been ordered to buy shares. There have also been restrictions on futures trading and a pledge to boost liquidity to keep the markets up. The securities watchdog said on its website late on Wednesday that holders of more than five per cent of a company’s stock would be barred from selling for the next six months.

"All these measures benefit stock market liquidity and help stabilise the market," Guan Qingyou, deputy head of Minsheng Securities, told the Xinhua news agency.

Xinhua also reported that the China Banking Regulatory Commission were investigating "malicious short selling" to stem the massive sell-off.