Chinese stocks continued their recovery on Wednesday following last week's fall, helped by a liquidity boost as an estimated 2 trillion yuan locked up in initial public offerings was released back into the markets.
A strong performance by utilities and telecommunications stocks saw Shanghai's main index recover from a midday slump to close up 2.48 per cent, or 113.66 points, at 4,690.15 and extend Tuesday's 2.19 per cent rise. In Shenzhen, the benchmark composite index rose 1.73 per cent, or 48.09 points, to 2,822.73 but was weighed down by a 0.35 per cent slide in technology stocks.
Still 10 per cent off recent highs, the rebound has for now put paid to speculation that last week's 13.3 per cent sell-off was the start of a major shake-up given both the indices have more than doubled in the past 12 months.
"There was some volatility in the market, particularly in the middle of the day but the last hour of trading was rather solid. The market clearly benefited from the end of the lock-up period of IPO capital," said Gerry Alfonso, a director of Shenwan Hongyuan Securities in Shanghai.
In recent days, a series of soothing newspaper editorials, likely aimed at the retail investor base, have sought to calm nerves by urging people not to panic as fundamental support for the market had not disappeared.
On cue, the Shanghai index's nine-day relative strength index, a key technical measure of whether an index is overbought or oversold, moved from oversold towards neutral territory.