Shanghai stocks rally after decrease

Shanghai. Shanghai stocks rallied more than two per cent yesterday as reports said state cash was used to support the beleaguered market following a two-day slump.

The benchmark Shanghai Composite Index rose 2.25 per cent, or 74.13 points, to 3,361.84 and the Shenzhen Composite Index, which tracks stocks on China’s second exchange, jumped 2.61 per cent, or 54.19 points, to 2,133.96.

But Hong Kong’s benchmark Hang Seng Index closed 0.98 percent, or 207.91 points, lower at 20,980.81.

Shanghai dived 6.86 per cent on Monday -- before trading was suspended -- after the release of weak manufacturing data heightened worries about the health of the world’s second-largest economy. That was followed by a 0.26 percent fall Tuesday.

The losses were exacerbated by worries about the lifting Friday of a ban on selling by investors holding more than five percent of a firm, which was brought in during the summer’s market rout to prevent further losses.

The selling led the government to inject billions of dollars into the financial system, with Bloomberg News saying vast sums were being spent by the state-linked “national team” on shoring up the stock market.

Also Wednesday the central bank cut the value of the yuan currency for the seventh session, setting its daily reference rate at the lowest level since April 2011, according to the national foreign exchange market.

“The ‘national team’ will intervene as long as the market shows big fluctuations,” Haitong Securities analyst Zhang Qi told AFP.

Separate reports that regulators will delay Friday’s planned lifting of the ban on selling also boosted sentiment, dealers said.

The suspected market intervention comes amid concerns over China’s flagging economy, which is expected to have grown in 2015 at its slowest pace in a quarter of a century. Official data on fourth-quarter and annual growth is due to be released later in January. (AFP)