China Shares Eke Out Some Gains

An employee looks at an electronic board at Tokyo Stock Exchange in Tokyo Thursday, July 9, 2015.

“If market conditions do not stabilise, we expect a statement of “whatever it takes” from the Chinese government, given that social stability is at stake and financial systemic risks are evident”.

The prohibition is also seen applying to foreign investors which hold stakes in Shanghai- or Shenzhen-listed companies, although most of their holdings are below 5 percent.

The trading halts appear to be separate from the flurry of measures rolled out by Beijing over the past week, as the country’s Communist leaders made increasingly desperate attempts to stabilize tumbling markets. Shanghai’s benchmark composite index was up 3.7%. This practice, known as “trading on margin”, used to be strictly regulated by the Chinese government.

“It’s a stampede”, said Wang Feng, chief executive officer and founder of hedge fund firm Alpha Squared Capital Co and a former Wall Street trader.

Over the past year, investors poured more and more into Chinese markets. In the past few days, the pages have been filled with messages declaring that many companies have suspended trading of their shares. Around 1,300 listed firms have announced that they have stopped selling their shares to avoid further drops in their value.

Before the downturn began on June 12, China’s stocks were surging and China’s main Shanghai composite index had more than doubled since the beginning of the year. The boom was a windfall for Chinese companies and big investors who sold before the peak.

The smaller Shenzhen market rose 3.8%.

The Shanghai market rocketed 5.76 percent on Thursday, after the government announced additional policies to curb a weeks-long market rout. China’s economy has been slowing down.

At the same time, fund managers like Wilson say the volatility and selloff is making the Chinese market more attractive for long-term investors, even if the market has not hit bottom yet.

In a further effort to shore up the market and prevent larger falls from forced sellers closing-out margin loans, China’s banking regulator also eased restrictions on Thursday.

“Investor confidence is recovering”, Zhang Gang, an analyst from Central China Securities, told AFP.

The mainland’s consumer price index rose 1.4 per cent last month from a year earlier, while the producer price index fell 4.8 per cent, data showed yesterday.

After falling for most of the day, shares turned around slightly on Asian markets but the yen slid against the dollar.

History suggests that won’t be a cure either.

By Wednesday, USA stocks had fallen sharply due to recent events, including the market turmoil in China, a rout in commodity prices, the Greek crisis and a major outage on the New York Stock Exchange spooked investors.