China stock market

China stocks rally after economic chief, financial and regulatory institutions step in to underline economy’s resilience

  • The rally came after Vice-Premier Liu He, China’s economic tsar, said the stock market “is becoming the market with the most investment value” in the world
PUBLISHED : Friday, 19 October, 2018, 5:52pm
UPDATED : Friday, 19 October, 2018, 7:34pm

Shares listed in China on Friday rallied the most in more than two months after the country’s vice-premier, central bank governor and financial regulatory institutions stepped in to calm investors amid its worst stock rout in about four years.

The benchmark Shanghai Composite Index surged by 2.6 per cent, or 64.05 points, to close at 2,550.46, its biggest one-day gain since August 7. It pared the week’s losses to 2.2 per cent, narrowing down from a 7.6 per cent slump last week.

The Shenzhen Composite Index, comprised mostly of smaller companies, climbed 2.6 per cent, or 31.81 points, to 1,263.81, while the Nasdaq-style ChiNext Index jumped by 3.7 per cent, or 44.86 points, to 1,249.89.

The rally came after Vice-Premier Liu He, China’s economic tsar, said the country’s stock market “is becoming the market with the most investment value” in the world, with “bubbles shrinking significantly”, in an interview with state media, including People’s Daily.

The heads of the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission also said on Friday they would roll out measures to ensure the healthy development of the market, and help listed private companies caught in a liquidity squeeze.

“The speeches and measures to prop up the market have lifted sentiment temporarily,” said Kingston Lin King-ham, director at securities brokerage AMTD.

China economic tsar steps in to steady ship after slowest quarter in decade, says stocks have ‘high investment value’

The combined trading volume for the Shanghai and Shenzhen markets stood at 287 billion yuan (US$41 billion) on Friday, up from 240 billion on Thursday. But Lin said he was sceptical about how long the rally would last for, as the overall sentiment was still being affected by the ongoing US-China trade war and underlying economy conditions in China that are not showing signs of improvement.

China on Friday reported that its GDP grew at its slowest pace in the third quarter since 2008, with a 6.5 per cent expansion from the same period last year.

“When the government tried to shore up the market in the past, the market would go up for one or two days and then continue falling. It’s unlikely to be different this time,” said Lin.

The Shanghai Composite Index has slumped by 23 per cent this year to its lowest level since November 2014, making China’s stock market one of the worst performers among the world’s major markets.

In Hong Kong, the Hang Seng Index edged up 0.4 per cent, or 106.85 points, to close at 25,561.4 on Friday.

Bourse operator Hong Kong Exchanges & Clearing closed up 3.1 per cent, after it announced the first transaction on its online commodities trading platform across the border in Shenzhen, in China’s southern Guangdong province. The platform currently allows mainland commodity industry players to list alumina for trading.