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China stocks turn positive on government moves

Update: July, 09/2015 - 15:36

SHANGHAIChinese stocks ventured into positive territory on Thursday in wildly volatile trading as Beijing took new measures to avert a crash and global markets fretted over the possible fallout.

By the end of the morning session, the benchmark Shanghai Composite Index was up 1.30 per cent, or 45.59 points, at 3,552.78. It fell as much as 3.81 per cent and rose as much as 2.62 per cent during morning trading.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 2.93 per cent, or 55.19 points, to 1,939.64.

"The market is still uncertain, but it's much better than previous days," said Qian Qimin, an analyst from Shenyin Wanguo Securities.

The Shanghai index has lost more than 30 per cent of its value since a spectacular bull run ended with a peak on June 12, driven lower by restrictions on margin trading, concerns about overvaluations, and fears of further losses.

Hong Kong stocks recorded their biggest single-day loss for more than six years on Wednesday as the market turmoil spread across the region, although they were almost four per cent higher on Thursday morning.

Tokyo stocks were down 0.69 per cent at the break, recouping earlier heavy falls.

US markets retreated on worries over how the stock market rout could affect the Chinese economy, the world's second largest and a key driver of global growth, and worries of a messy Greek exit from the eurozone. The Dow Jones Industrial Average finished down 1.47 per cent.

Late on Wednesday, the market regulator barred major shareholders and executives of listed companies from selling their shares for the next six months, the latest government action to stem a slide in the markets.

The ban applies to "big" shareholdersdefined as those with stakes of more than five per cent – company directors, board supervisors and senior executives, the China Securities Regulatory Commission (CSRC) said. The move aimed to "maintain stability" of the stock market, it said.

The announcement was the latest from the government as it struggles to contain the crisis.

More than 1,400 companies have been suspended from trading on China's bourses as of Thursday, representing around 50 per cent of listed stocks, according to Bloomberg. The move temporarily averts further falls in their prices, but seizes up the markets.

'Whatever it takes'

The contagion has spread to the commodities market, where China is a massive consumer of resources such as metals and grain.

Prices have been dropping for months in the face of the country's growth slowdown, but the spot price of iron ore, a key export to China, took its biggest one-day hit ever overnight, falling 10 per cent to $44.59 a tonneits lowest since May 2009.

Among the latest intervention measures, the central People's Bank of China said on Thursday that it was providing liquidity to the state-backed China Securities Finance Co (CSF) to help stabilise the market, reaffirming an earlier pledge.

In a separate announcement, the stock regulator said CSF will provide liquidity for investors to buy so-called "public funds"similar to a mutual fund.

Police and security regulators launched a joint probe on Thursday into "vicious short-selling" on the country's stock markets, the official Xinhua news agency reported, only giving limited details. Short-selling is the selling of stock that is not actually held, in anticipation of a future fall in prices.

Other recent moves include allowing insurance companies to invest more assets in stocks and a programme to buy the shares of smaller companies. — AFP 

 

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