Hong Kong Stock Exchange

China stocks end wild session slightly lower as state funds return to prop up market

PUBLISHED : Wednesday, 27 January, 2016, 9:22am
UPDATED : Wednesday, 27 January, 2016, 5:50pm

The Chinese stock markets took another wild ride on Wednesday as jittery investors sent the Shanghai benchmark index sinking as much as 4 per cent but a late rebound in blue-chip oil shares managed to help the index recover most losses and close only slightly lower.

Analysts said signs showed markets received a boost in afternoon trade from possible stock buying by government-backed funds.

The Shanghai Composite Index ended down 0.52 per cent at 2,735.56, after tumbling 4.1 per cent to an intra-day low of 2,638.30 around 1pm and bouncing back in the next two hours of trading. The benchmark index plunged 6.4 per cent Tuesday to a 13-month closing low on worries over the oil prices weakness and China’s economic slowdown.

Hong Kong’s Hang Seng index rose 1 per cent to settle at 19,052.45, tracking a broad advance in Asian markets following an overnight rally in US stocks on rising oil prices and better-than-expected corporate results.

In Shanghai, the heavily weighted PetroChina jumped 2.97 per cent to close at 7.29 yuan while state-owned refining giant Sinopec climbed 1.9 per cent to 4.36 yuan.

Among other gainers, China Minsheng Banking Corp rose 1.9 per cent to 8.52 yuan, China Merchants Bank gained 0.9 per cent to 15 yuan, and Industrial and Commercial Bank of China added 0.74 per cent to close at 4.11 yuan.

A Shanghai-based private equity fund manager, who spoke on condition of anonymity, said blue-chip oil stocks, such as PetroChina and Sinopec, often become the targets of government-backed funds to influence the stock market.

Han Dongliang, an analyst for Beijing-based TX Investment Consulting, said in a note that the rebound in the afternoon was seemingly due to state-sponsored stock buying by the so-called National Team.

“Most of the rising shares are blue chips and concept stocks linked to state-owned enterprise reforms, including oil companies, coal miners, banks, and subject stocks in the CSI300 index and SSE 50 Index,” he said.

Looking ahead, analysts said stock indexes may continue testing support levels as worries linger over China’s economic fundamentals and a possible liquidity squeeze before the week-long Lunar New Year holiday.

“We suggest investors maintain a watch-and-see attitude and wait for clearer signals on PBOC’s monetary policy,” said Yu Haitao, an analyst for First Capital Securities.

Jasper Lo cho-yan, a director of Tung Shing Futures, said investors were also closely watching the Federal Reserve’s two-day meeting starting Tuesday.

“While the market widely expects the US Fed will not increase the interest rate, we, however, all wait for the statement issued after the Fed meeting which could indicate the pace of the interest rate rises this year,” Lo said.

Elsewhere in Asia, Japan’s Nikkei Average advanced 2.7 per cent to close at 17,163.92 and South Korea’s Kospi Composite Index added 1.4 per cent to end the day 1,897.87. However, Australia’s S&P/ASX 200 dropped 1.2 per cent to close at 4,946.40, catching up with a previous retreat in Asian markets after returning from a public holiday.