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Shanghai - China’s stocks advanced amid government efforts to shore up the share market after the worst start to a year on record.
The CSI 300 Index gained 0.2% at 1:08 p.m. after changing direction about five times. The Hang Seng China Enterprises Index lost 1.2%. Datong Coal Industry and Shaanxi Coal Industry jumped by the 10% daily limit as Premier Li Keqiang pledged to tackle overcapacity in the industry.
The central bank cut the yuan reference rate to the weakest since April 2011, a sign that policy makers are becoming more tolerant of depreciation as intervention costs rise and economic growth slows.
Policy makers revived intervention in the $6.5trn market this week as state-controlled funds bought equities on Tuesday after a 7% plunge on January 4 and the securities regulator signaled a selling ban on major investors will remain beyond its January 8 expiration date, according to people familiar with the matter.
The People’s Bank of China injected the most cash since September into the financial system to keep a lid on borrowing costs, while the monetary authority was also said to intervene in the currency market to prevent excessive volatility.
“There’s word spreading in the market that state funds are buying, but the idea is to hold up the market, not to bolster it by a large margin,” said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai, adding that he’s keeping stock holdings unchanged at about 40% of asset allocation. “The market has basically stabilized after the tumble and investors are waiting for further policies that will boost sentiment.”
The Shanghai Composite Index climbed 0.6%. The Hang Seng Index fell 1%.
Depreciation Room ‘Limited’
The Shanghai gauge tumbled 7.1% in the first two days of trading in 2016 and the yuan had its worst start to a year since 1994 amid concerns China’s economic slowdown is deepening.
The yuan, which weakened the most since 1994 last year, has “limited” room for further depreciation as slumping oil prices will help boost the government’s current account surplus and offset capital outflows, according to Goldman Sachs Group.
Gauges of energy and materials stocks jumped at least 3.2%, the biggest gainers among industry groups on the CSI 300 Index. China Shenhua Energy, the nation’s largest coal producer, jumped 5%, China Coal Energy added 6%.
Premier Li said the government would help the coal industry through tough times as it faces serious overcapacity and falling prices, according to a statement posted on the central government website after Li’s visit to Shanxi province.
China Vanke, the developer whose shares were halted last month amid a battle for control with its largest shareholder, dropped the most in a year-and-a-half after resuming trading in Hong Kong. The stock was down 11% after plunging as much as 14%.
New World China Land Ltd. jumped 21% to its highest intraday level since November 2007 in Hong Kong after parent New World Development offered to take the company private for HK$21.5bn ($2.77bn).
Executive Probes
Changjiang Securities slid 1.7% in Shanghai after reports the chairman of the mid-sized brokerage is under investigation by the Communist Party. Yang Zezhu, who’s in his early 60s, is suspected of violations of discipline for “personal reasons,” the company told Shenzhen’s stock exchange in a statement on Wednesday.
The case adds to investigations over the past year that have entangled finance industry figures including securities regulators and senior executives at Citic Securities Co., the nation’s biggest brokerage.
Margin traders reduced holdings of shares purchased with borrowed money for a third day on Tuesday, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling to a two-month low of 662.4bn yuan ($101.7bn).
