Battered China and Hong Kong markets finish higher as rout abates, but stock in grip of uncertainty

Chinese shares finished higher on Thursday as the market's free-fall in the world's second largest economy seemed to ease for now, with bottom picking giving beleaguered stocks some relief from a rout that has mercilessly pounded equity markets the past four weeks.

The Shanghai Composite Index jumped 5.76 per cent, or 202.14 points, to close at 3709.33.

Shenzhen's Component Index, dominated by small-and mid-caps, rose for the first time in seven days, adding 4.25 per cent to settle at 11510.34. 

Hong Kong's Hang Seng Index added 3.73 per cent, or 876.23 points, to close at 24,392.79 while the Hang Seng China Enterprises Index rose 3.05 per cent, or 339.07 points, to settle at 11,446.37.

The Hang Seng had posted its biggest single intra-day fall during trading on Wednesday. 

Ben Kwong Man-bun, executive director and head of research of KGI Asia, said the market is struggling with uncertainty after the mauling it endured.

“The Hong Kong market has been oversold, the valuation is very cheap and this should attract investors to come back to the market. However, the US stocks fell overnight while A-shares markets have not yet been stable. This adds to the uncertainty,” Kwong said.

For a live blog of action in the Chinese markets, click here.

Restoring confidence among retail investors is critical for the sustainability of the rebound, Gerry Alfonso, a trader at Shenyin Wanguo Securities in Shanghai

"We see deep value being created, particularly in the H-share market," said a strategist at Citi. "Dividend yields are becoming very competitive and H-shares are once again at a 42 per cent average discount to A-shares for dual-listed firms."

Investors on the mainland started to feel the effect of a flurry of market-boosting measures from policy makers in Beijing, including the latest from the China Banking Regulatory Commission saying it would allow financial institutions to renegotiate maturity terms with their clients and allow banks to ease margin requirements for borrowers.

“We think it’s time to think about bottom fishing in the H share but slowly and cautiously. We think the A shares will further correct,” Xingtai Capital Management chief executive Michelle Leung said.

Although a handful of companies resumed trading on the mainland exchanges, there are still about 1,400 A-share companies or half of all listed firms that have voluntarily suspended trading in their shares in both Shanghai and Shenzhen.

China’s Securities Regulatory Commission said late on Wednesday it would ban shareholders, directors or senior management with stakes of more than 5 per cent in companies from selling their shares for the next six months.

It said it would seriously deal with any shareholders who violated the rule.

The CSRC also relaxed the rule to allow companies and directors to easily repurchase their sharesy.

China’s PBoC has provided further credit to China Securities Finance Corporation and allowed corporations to issue financial debentures, including short-term financing bonds on the inter-bank bond markets, the official Xinhua news agency reported citing the central bank.