Chinese stock markets saw a bout of volatile trading on Wednesday, with stocks ending the day higher after seeing a steep slump in morning trade. The government, meanwhile, stepped up efforts to support the economy.
Following a more than 6% plunge on Tuesday, Shanghai stocks closed in positive territory on Wednesday, climbing 1.23%.
But stocks went on a wild ride in the course of the trading session, and at one point of time they were down as much as 5.06%. However, they later recovered their losses due to hopes the government in Beijing would step in to prop up the market, traders said.
The rebound followed news the People’s Bank of China (PBoC), the central bank, had made $17bn (€15.4bn) available to more than a dozen financial institutions to help boost the economy.
A day earlier, the PBoC had also injected funds – amounting to some $100nm – into the country’s policy banks, which lend based on government directives and are responsible for financing state-invested projects.
The move was to enhance their capital base and ability to ward off risks, reported the official Xinhua news agency.
Chinese shares have been highly volatile in recent months, losing almost a third of their value in a matter of weeks in June, after having risen over 150% in the preceding year.
After the collapse, the government intervened with a rescue package that included funding the state-backed China Securities Finance Corp. (CSF) to buy stocks on behalf of the government.
The government also barred “big” investors from selling stakes and cracked down on short-selling – a practice where investors bet on falling prices.
Despite the efforts, markets in China have remained bumpy, with investors increasingly worried about the slowdown afflicting the world’s second largest economy.
While Beijing’s official growth target stands at 7%, some economists estimate the current expansion rate to be around half that.
In a bid to stimulate the stalling economy, authorities have loosened monetary policy by reducing benchmark interest rates four times since November and have also lowered the proportion of funds banks must hold – the reserve requirement ratio (RRR) – three times.
But investors hope Beijing will further cut rates or lowering the reserve requirements – which would be positive for the stock market.
sri/hg (AFP, Reuters)