China stocks jumped more than 4 per cent for a second straight day on Friday as signs of fresh support from Beijing prompted more bargains.
China’s surprise currency devaluation on Aug. 11 and a survey showing deteriorating factory activity had helped trigger a savage selling spree.
The devaluation, which panicked global markets at one point, drove stocks down more than 20 per cent within a week.
Stocks on Chinese exchanges rebounded as authorities announced that pension funds managed by China’s local governments would start investing 2 trillion yuan ($313.05 billion) as soon as possible in stocks and other assets.
“But investor confidence remains shaky,” said Dominic Chan, analyst at GF Securities in Hong Kong.
He said many investors believed the recent rally in Hong Kong is not sustainable, and they felt that way about mainland markets too.
The central bank was also seen intervening for a second day to stabilise the yuan currency to reduce market expectations of further yuan depreciation, traders said.
In further signs of government intervention, China’s securities regulator said after Friday’s close that it would tighten margin requirements further for stock index trading, in a bid to curb excessive speculation.
All main stock sectors rose on Friday, with small-caps leading the rally.
Shenzhen’s growth board ChiNext surged 6 per cent while the Shenzhen market, which hosts China’s smaller companies, jumped 5.4 per cent.
Banking stocks, which surged on Thursday, under-performed the market after top lenders this week reported virtually no growth in profits in the first half of the year.
A further increase in bad loans added to worries about the economy.
During the first four days of the week, there were 28.7 billion yuan ($4.48 billion) of net inflows into Shanghai-listed blue-chips via the Shanghai-Hong Kong Stock Connect Scheme.
But on Friday, there was a net outflow of 2.4 billion yuan, suggesting some foreign investors took profit.
(Reuters/NAN)