China stocks bounce back to cap second week of gains, defying property cooling measures

Chinese stocks stabilised on Friday after heavy losses in the previous session, with the benchmark index capping a second week of gains as investors appeared to have shaken off the latest cooling measures in Shanghai’s property market and the continued weakness in the yuan.

PUBLISHED : Friday, 25 March, 2016, 9:58am
UPDATED : Friday, 25 March, 2016, 7:00pm

Chinese stocks stabilised on Friday after heavy losses in the previous session, with the benchmark index capping a second week of gains as investors appeared to have shaken off the latest cooling measures in Shanghai’s property market and the continued weakness in the yuan.

The Shanghai Composite Index ended Friday’s choppy session higher by 0.62 per cent or 18.46 points at 2,979.43, bouncing back from Thursday’s sharp losses. For the week, the index rose 0.8 per cent, adding to the previous week’s 5.2 per cent gain.

The large-cap CSI300 closed up 0.5 per cent or 15.97 points at 3,197.82. The Shenzhen Composite Index rose 0.5 per cent or 9.07 points to 1,885.18, while the Nasdaq-style ChiNext Index slipped 0.2 per cent or 3.68 points to 2,216.09.

Turnover for Shanghai and Shenzhen markets shrank to 553 billion yuan, down sharply from Thursday’s 738 billion yuan.

Han Zhipeng, a trader at Huaxin Securities, said today’s lacklustre trading was mainly due to the weekend effect that left investors on the sidelines until clearer signals emerge.

“The markets were volatile in the past week after previous gains. It may remain choppy next week, as investors have become increasingly cautious, “ Han said.

He said investors should watch for “short-term investment opportunities” in some sectors like brokerage firms and online finance companies.

On Friday morning, the Shanghai city government announced that it would tighten home-buying rules and lending policy to curb a rapid surge in local house prices. Measures included tightening mortgage loan standards for second-home buyers and a higher threshold for eligible non-local residents who can purchase homes in Shanghai.

“The new cooling measures (in Shanghai) are as we expected, “ said Ning Jingbian, an analyst for China International Capital Corp. She said the home prices in big cities like Shanghai and Shenzhen have risen “too much” and “too fast” over the past several months.

“The government has said it will take actions that suit local conditions (to regulate diverging property markets). We expect Shenzhen city to follow Shanghai (and cool local housing prices) too,” she said.

Markets also had little reaction to the continued weakness in the yuan.

On Friday, the People’s Bank of China lowered the yuan’s fixing to 6.5223 per US dollar, the weakest level in three weeks. The fix was down 0.11 per cent or 73 basis points than the previous day’s midpoint rate of 6.515. The offshore rate fell Friday morning to hit a three-week low of 6.5285 against the US dollar.

Stephen Innes, a senior FX trader for OANDA, said the long -term prospective of the yuan remain weak but unlikely to fall sharply as the government is keen on keeping it stable.

“Capital outflows will be a concern along with China’s struggling economy,” he said. “While early signs indicate the numerous macro-prudential measures put in place last year are taking hold, it is still too early to declare the programmes as successful.”

On mainland markets, some brokers recouped some losses after sharp declines on Thursday. Haitong Securities climbed 1.4 per cent to 14.35 yuan and Citic Securities rose 0.5 per cent to 17.49 yuan. Property stocks also posted modest gains, with Geemdale Corp up 0.9 per cent to 12.06 yuan and Poly Real Estate Group higher by 0.6 per cent at 9.61 yuan.

Hong Kong markets were closed on Friday for the Easter holidays and will reopen on Tuesday.

With additional reporting from Enoch Yiu.

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