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China Shares Break Three-Day Losing Streak

China Shares Break Three-Day Losing StreakChina Shares Break Three-Day Losing Streak

China’s shares ended higher Wednesday as officials stepped up efforts to calm markets, while other Asian shares were roughly flat, with focus shifting to corporate earnings and the Federal Reserve’s monetary-policy meeting.

The Shanghai Composite gained 3.4%, ending at 3789.16, after flitting between gains and losses earlier. The smaller Shenzhen Composite rose 4.1% to 2198.81, Dow Jones reported.

Hong Kong’s Hang Seng Index is up 0.6% while a gauge of Chinese companies listed in the city is up 1%.

The gains follow three days of selling, which knocked 11% from China’s main stock index. Shanghai remains down more than a quarter from its June high and is only up 3.7% from the worst of its selloff earlier in the month.

“While it is far too soon to see if the market has reached a more stable level...it seems that the comments by authorities, reassuring investors about their commitments to support the market, are working,” said Gerry Alfonso, Shanghai-based director of trading at Shenwan Hongyuan Securities.

Officials have come out to soothe investor concerns amid the second bout of selling this month. On Tuesday afternoon, China’s securities watchdog said it would investigate whether a coordinated dumping of shares sparked Monday’s selloff. Late Monday, the regulator said it would increase its support to the market.

“The market must generate a wealth effect so that investors can regain confidence,” said Tang Yonggang, another analyst at Shenwan Hongyuan Securities, adding that state-backed funds may be getting diverted to infrastructure and military stocks.

Still, many investors remain cautious. Shanghai has swung wildly intraday. On Tuesday, the benchmark vacillated in a 6% band, though it ended the day off just 1.7%.

 Investors at Record Low

In the wake of the volatility, the number of new stock investors in China has dropped to a record low. Investors opened 390,600 new stock trading accounts in the week ended July 24, down 26% from the previous week, according to the database CEIC, citing the China Securities Depository and Clearing Corporation.

The latest round of heavy selling appears to have further flushed out borrowing by investors to make bigger bets on the market. Margin financing fell to 1.38 trillion yuan ($222.26 billion) Tuesday, the lowest since March 19, according to the latest data by Wind Information Co, from 1.43 trillion yuan on Monday.

Still, hundreds of billions of yuan remain in the form of margin financing from unofficial lenders, such as Internet-financing platforms that authorities are looking to monitor more closely.

Meanwhile, South Korea’s Kospi was flat and Australia’s S&P ASX 200 was up 0.7% after gains overnight in the US and Europe helped retrace deep losses from Monday.

Financialtribune.com