Wednesday, 02 September 2015 10:39
SHANGHAI: Shanghai stocks were up slightly by the break on Wednesday ahead of a market holiday, but sentiment remained fragile due to worries over China’s slowing economy, dealers said.
The benchmark Shanghai Composite Index edged up 0.31 percent, or 9.72 points, to 3,176.34. It slumped as much as 4.66 percent during the morning session before recovering.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, added 0.67 percent, or 11.46 points, to 1,719.24.
But analysts said sentiment remained weak over China’s slowing economy, falls in global markets and questions over the level of state support for stocks.
“The government seems to have been buying blue-chips these days to support the market but investors have lost confidence amid the ongoing deleveraging and the overnight global rout,” Wu Kan, a Shanghai-based fund manager at JK Life Insurance, told Bloomberg News. “The correction isn’t over yet.”
The government has launched a rescue package to prop up the market, which includes funding state-backed China Securities Finance Corp. (CSF) to buy shares, but investors worry the government will reduce its intervention.
Global stock markets plunged on Tuesday on the evidence of the slowdown in China’s economy — the world’s second largest — which triggered sell-offs on US and European exchanges.
The Chinese government said Tuesday that its Purchasing Managers’ Index (PMI) of manufacturing activity came in at 49.7 last month, its lowest for three years.
One analyst said the mood was also soured by an apparent renewed crackdown on funds used for margin trading — by which investors use borrowed funds to trade on the markets with only a small portion of money put down as deposit.
“Regulators are quite determined to clear out all the funds that are trading with money borrowed outside official margin trading channels,” Phillip Securities analyst Chen Xingyu told AFP. “That’s why the market was down in the morning.”
Trading on China’s stock markets has been extremely volatile for the past two months, after a 150 percent rally over the previous year collapsed from its peak in mid-June.
The state-owned China Securities Journal reported on Wednesday that securities firms are transferring more funds to the CSF to help stabilise the market, with the additional amount estimated at more than 30 billion yuan ($ 4.7 billion).
Analysts estimate the Chinese government has spent hundreds of billions of dollars to prop up stock prices.
Chinese financial markets will be closed on Thursday and Friday for a holiday to commemorate the 70th anniversary of victory over Japan and the end of World War II, with trading to resume on Monday.
