Shanghai rises on hopes for new funds
Stocks rally 4.3 per cent as investors jump into the market after the regulator says it will quicken the approval of investment products
The mainland's securities regulator has decided to simplify fund approval procedures to direct a massive capital inflow into the weak stock market, heightening investors' hopes for a strong government-orchestrated rally.
The commission will reportedly shorten the review period for new investment product applications, a move to enhance market liquidity.
The Shanghai Composite Index yesterday rose 4.32 per cent to close at 2,150.63 points on the news - its best single-day showing since October 2009.
The CSRC has previously fast-tracked mutual fund approvals in a bear market to shore up investor confidence.
The new policy could usher in dozens of new funds onto the market in the short term, analysts said.
Sources close to the CSRC said the regulator was under heavy pressure from the central leadership to underpin the weak stock market since severe losses by about 100 million retail investors could cause social chaos.
Xinhua published a commentary yesterday, criticising the regulator for failing in its attempt to boost investor confidence while calling on it to reform the ailing initial public offering system.
The Shanghai market was among the world's worst performers in the past two years.
Investors also pinned hopes on the upcoming annual economic conference of the Communist Party's central committee, which is expected to unveil fresh policies to stimulate the economy.
"The rally turned out much stronger than we expected," Shenyin Wanguo Securities analyst Wei Daoke said. "If the market were to continue its upward trend, more funds are likely to flood in to chase a further rally."
Investors also took a cue from the HSBC flash purchasing managers' index for this month, which rose to 50.9 points, the highest in 14 months. A reading above 50 indicates growth in manufacturing.
Yesterday, the Shanghai Composite Index broke through a technical barrier at 2,132 points. Analysts predict it could rise to the 2,200-point level in the coming trading days.
"Retail investors still believe the government has the clout to give the market a lift," West China Securities trader Wei Wei said. "The PMI data just provided a catalyst for the buying spree."
In the past two decades, Beijing would roll out measures to support the falling stock market, but such rallies often proved short-lived as profit taking emerged.
The CSRC has not approved any initial share sale since October 10, an apparent effort to stem a further market slide.
