Chinese stocks rise as Beijing’s intervention aids relief

Chinese stocks rose yesterday, as an unprecedented series of support measures unleashed by Beijing brought some relief to a market whose headlong slide over the past three weeks had raised fears about the stability of the world’s second-biggest economy.

In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.

The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen closed up 2.9 percent, while the Shanghai Composite Index .SSEC gained 2.4 percent.

That represented a significant pullback, however, from an initial burst of euphoria that pushed both indexes up around 8 percent when trading began, raising questions about whether the rebound can be sustained.

Oliver Barron, China policy research analyst at NSBO, said it wasn’t just faith in the markets at stake after investors had ignored official measures to prop up equities as indexes slid around 12 percent last week.

“After the market continued to fall despite myriad support measures, the government reached peak panic mode and must have worried that investors would not only lose confidence in the markets, but in the government itself,” he said.

The rapid decline of China’s previously booming stock market, which by the end of last week had fallen around 30 percent from a mid-June peak, had become a major headache for President Xi Jinping and China’s top leaders, who were already struggling to avert a sharper economic slowdown.

In response, China has orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

Traders have also complained that some firms may be ducking out of the market turmoil by seeking a trading suspension, as an unusually large number of companies – about a quarter of all those listed in Shanghai and Shenzhen – have filed for a halt.

Recent falls in commodity markets, which are sensitive to expectations of Chinese demand, underline the broader fears among global investors about the strength of the economy.