Shanghai shares closed up more than 5 percent yesterday after a rollercoaster ride — following a fortnight of losses — that saw them at times down by a similar margin.
The benchmark Shanghai Composite Index shot up 5.53 percent, or 224.19 points, to 4,277.22 on turnover of 941.5 billion yuan (US$154 billion).
It varied by more than 10 percent over the course of the day in heightened volatility following a weekend interest rate cut that had failed to arrest the falls on Monday.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, jumped 4.8 percent, or 112.83 points, to 2,464.23 on turnover of 721.4 billion yuan. Its intraday range was more than 11 percent.
When Shanghai peaked on June 12, it had risen more than 150 percent above the previous 12 months, partly fueled by margin trading — in which investors borrow cash to invest in stocks, a practice that enhances both profits and losses.
Both Shanghai and Shenzhen subsequently fell by more than 20 percent, a common definition of a bear market, but yesterday’s rise took Shanghai out of that zone.
“The early-morning plunge was a continuation of recent falls and the lowest point the [Shanghai] market tested in the morning should be the bottom level that the [Chinese] government can bear,” Phillip Securities Group (輝立證券) analyst Chen Xingyu (陳星宇) told reporters.
“The rapid run-up, as well as the quick plunge of Chinese stocks, are partly caused by immature retail investors, which in a way reflects the immaturity of Chinese equity market,” he added.
“China’s market regulator is also responsible for the volatile market, because all it has done are post-damage and passive interventions,” he said.
On Saturday, China’s central bank announced interest rate cuts of 0.25 percentage points and reduced some reserve requirement ratios — limits on the amounts banks can lend — by 0.5 percentage points.
The move has been widely seen by analysts as an attempt to shore up the markets, rather than addressing economic fundamentals.
Authorities are also considering investing some of China’s social security funds in equities, officials said.
“After the recent correction, investors might think stocks are oversold and hope regulators will introduce further measures to support the market,” Shen Zhengyang (沈正陽), Shanghai-based analyst at Northeast Securities (東北證券), told Bloomberg News.
Analysts say the past fortnight’s declines were mainly triggered by new restrictions on margin trading and accelerated by growing concern that stocks were overvalued after the market’s extended climb.
Other markets in Asia rebounded yesterday after the previous day’s rout, despite Greece being just hours away from default. The euro edged down and analysts warned of sharp movements this week as Greece prepares for a Sunday referendum on creditors’ bailout reform proposals, which European leaders say boils down to an in/out vote on the eurozone.
Taipei rose 0.94 percent, or 86.92 points, to 9,323.02, while Wellington rose 0.37 percent, or 21.15 points, to 5,726.96.
Tokyo ended 0.63 percent higher, adding 125.78 points, to 20,235.73, Sydney gained 0.67 percent, or 36.5 points, to 5,459 and Seoul also put on 0.67 percent, or 13.71 points, to 2,074.2.
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