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Shanghai - China’s stocks rose, with the benchmark index entering a bull market, after an unprecedented state rescue effort halted a $5trn crash and ordinary investors returned to the market.
The Shanghai Composite Index climbed 1.8% to 3 522.82 at the close, taking its advance from its August 26 low to more than 20%. Gains on Thursday were led by brokerages, while turnover was the highest since August 18.
The Hang Seng China Enterprises Index rose 0.5% in Hong Kong at 09:02, extending a 17% advance since this year’s September 7 low.
The government took extreme measures to shore up equities as a boom turned to bust in June, including banning major stockholders from selling shares, curbing short selling and directing state funds to purchase equities.
While government- owned funds still influence the market, evidence of heavy intervention has dwindled as late-day rallies become less frequent. Margin debt is also rising, volumes have stabilized and companies favored by individual investors are leading the rebound.
“All the sellers who needed to sell have,” said Francis Cheung, a senior strategist at CLSA in Hong Kong. “The government has successfully clamped down on short selling.
So it is easier for market to go up, especially with anticipation that China will cut rates and do more stimulus." He said he favored interest-rate sensitive sectors such as banks, property and Internet companies.
Government stimulus
To keep growth on track, the People’s Bank of China has cut its benchmark interest rate six times in the past year, to a record low 4.35%.
The world’s second-largest economy grew 7% in both of the first two quarters of this year, in line with the government’s goal for this year, before the expansion slowed to 6.9% in the third quarter.
The Shanghai Composite entered a bear market on June 29, ending a 935-day long bull market -- the nation’s longest. The gauge is still down 32% from its June 12 high.
