Mainland stock markets recovered Thursday afternoon after plunging in morning trade.
Shares in Shanghai fell more than 5 per cent at one stage after mainland brokerage Golden Sun Securities said it had curbed margin trading to ChiNext stocks owing to concerns of rising risks in the Nasdaq-style board, largely made up of technology and internet companies, whose index has tripled in the past year.
The Shanghai Composite Index dropped as much as 5.3 per cent at one stage, before closing up 0.76 per cent at 4,947.1, driven by solid gains in mainland banking and coal mining stocks amid ample liquidity.
The Shenzhen Composite Index fell 6.17 per cent before recovering to close down just 0.58 cent, or 17.72 points, at 3,023.7 points, while the ChiNext Price Index ended the morning session down 3.7 per cent but closed the day down 1 per cent at 3,943.47 points.
Bill Gross, the influential investor who now manages a US$1.5 billion bond fund at Janus Capital, wrote on Twitter on Wednesday that the red-hot shares on the Shenzhen bourse were the next big trade for short sellers.
But Xingtai Capital Management chief executive Michelle Leung said that while it was reasonable to believe bubbles were developing, the rally in mainland stock markets was partly motivated by the central government, which had encouraged individual investors to participate in the liquidity-driven rally. “Most institutional investors remain on the sidelines,” Leung said.