U.S. funds not bailing on China yet

The impact on Chinese investors is direct, but for investors in the USA, Europe and elsewhere, it’s not as simple.

The United States administration has expressed concerns the stock market crash could delay Beijing’s economic reforms. In hindsight, though, a reversal was not unexpected given the astonishing run-up in Chinese share prices. Shenzhen was No. 5 with 112 deals that raised $7 billion.

“The market sees some positive signs today”, said Du Changchun, analyst at Northeast Securities in Shanghai.

The only solution, analysts say, is for Beijing to stop intervening in the market and let it play out organically – or risk worsening the situation further and, by extension, harming the government’s reputation even more.

As the losses have deepened, though, worries have increased and officials have taken direct action to stem the selling.

Only six stocks fell on Friday, while shares of 1,452 listed companies rose, majority hitting the upward limit of 10 percent.

Stocks kept rising despite a number of red flags, including a slowdown in China’s economy and the fact that share prices had become exceptionally rich compared with many of their companies’ underlying earnings. “When things look bad, they run away”.

The plunge in China’s previously booming stock markets, which had more than doubled in the year to mid-June, has created a major headache for Xi and China’s top leaders, who are already grappling with slowing growth. Despite logging its biggest one-day rise since 2009 on Thursday, the previous 17 days saw the index collapse by 32.1%.

Hong Kong’s Hang Seng index closed up 2.41% to 24,980, recovering after investors shunned from the Chinese markets sold Hong Kong stocks to raise funds. Foreign investors also might shy away from Chinese stocks for an extended period. The capitalization of Chinese stock market in GDP is much smaller than the US.

The lack of access has made it hard for investors, including US fund managers, to get exposure to the Chinese stock market.

There is a decent chance of “another leg down” for stocks within the next few months when the government starts to withdraw its support in terms of liquidity, David Cui, Bank of America’s head of China equity strategy, said on a conference call on Friday.

The rebound came after China’s securities regulator, in its most drastic step yet to arrest the slump, banned shareholders with large stakes in listed firms from selling. The percentages, though, are small. This group includes individual stock purchasers, majority ordinary citizens with no financial expertise who are often using borrowed funds. But as the Financial Times explains, Chinese authorities have gradually relaxed these requirements over the past five years.

NEW YORK (AP) – USA stocks are opening with big gains, bouncing back from a loss the day before, as investors hoped that last-ditch talks would produce an agreement between Greece and its creditors.