MW: Chinese stocks flip to gains after sharp losses earlier
A swift, steep drop in China shares flipped to gains Wednesday, the latest signal that Beijing won’t let the market fall too sharply before engineering a rescue.
The Shanghai Composite Index SHCOMP, +1.23% which fell as much as 5% earlier, ended up 1.2% at 3,794.11, and the smaller Shenzhen Composite 399106, +2.19% gained 2.2% to 2,222.05. The startup-dominated ChiNext board gained 2.7% to 2,570.69.
Meanwhile, the volatility hitched off further losses in Hong Kong’s Hang Seng Index HSI, -1.31% which has wiped out all year-to-date gains. The index fell 1.3% Wednesday, while a gauge of Chinese companies listed in the city lost 1.2%.
China’s trading partners in the region also racked up losses. Japan’s Nikkei Stock Average NIK, -1.61% fell 1.6%, while South Korea’s Kospi SEU, -0.86% fell 0.9%.
The U-turn came after a handful of companies disclosed their biggest shareholders, some of which included state-backed firms. Analysts say that gave investors a sense of security in Beijing’s market role.
Afternoon rallies aren’t uncommon, as investors who anticipate Beijing might step in during the final minutes of trading ramp up buying to ride the gains.
“It’s a clear sign that the government is intervening in the market … otherwise their previous efforts would have been in vain,” said Zeng Xianzhao, a manager at Nuoding Asset Management.
In a company filing midday on Wednesday, Dongxu Optoelectronic Technology, disclosed that its third- and fourth-largest shareholders as of August 14 were China Securities Finance Corp., the state-run firm tasked with propping up the market, and Central Huijin Investment, the domestic investment arm of China’s sovereign-wealth fund. Stock of the company, which manufacturers electronic-accessory components, hit its upward daily limit of 10%.
Also Wednesday, Zhefu Holding Group, which manufacturers turbine generators, disclosed that Central Huijin is the company’s biggest shareholder, according to a filing on the Shenzhen stock exchange. Its shares also limited up.
While not all companies counting state-backed firms among their biggest shareholders gained Wednesday, the announcements offered enough of a confidence boost to spill into the broader market.
Some 173 stocks reached their upward daily limited Wednesday, with just nine falling to their downward limit on the Shanghai and Shenzhen exchanges, according to Wind Information Co.
Earlier Wednesday, China’s main stock index, which has shed 30% since its June peak, fell within a whisker, some 51.2 points, from the low set on July 8 — before Beijing’s massive stock-rescue operation that spanned from directing state funds to buy shares to halting initial public offerings and sending police after “malicious” short sellers kicked into gear. On Tuesday, the central bank poured a huge amount of cash into the financial system to offset capital flight after devaluing the yuan last week.
