With wide-ranging new rules aimed to curb selling and much of the market in a trading halt, the benchmark Shanghai Composite index put on 5.79%, its largest one-day percentage increase since March 4, 2009.
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Beijing/Shanghai – China’s securities regulator took the drastic step of banning shareholders with stakes of more than 5 percent from selling shares for the next six months in a bid to halt a plunge in stock prices that is starting to roil global financial markets. The government widened the scope of support measures after earlier interventions failed to stop a selloff that wiped out $3.9 trillion in less than a month.
The Dow Jones industrial average rose 33.2 points, or 0.19 percent, to end at 17,548.62.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, added 3.67 percent, or 69.22 points, to 1,953.67.
An investor looks at screens showing stock market movements at a securities company in Beijing on July 9, 2015.
“Investors” panic and irrational sell-off caused a liquidity strain on the stock market, ‘ Deng Ge, a spokesman for the China Securities Regulatory Commission (CSRC) – the market watchdog – was quoted by state media as saying.
The government has given money to brokerages to buy stocks – and ordered company executives not to sell their shares. Many are probably still holding shares whose values are quickly diminishing, unable to get rid of them because trading in those stocks has been suspended by the companies or the shares quickly drop after the market open to the daily 10 percent limit on losses. Authorities hope that the latest directive can at least pare down the selling frenzy in the Chinese stock market.
Police and security regulators then launched a joint probe Thursday into “vicious short-selling” on the country’s stock markets, the official Xinhua news agency reported.
A few analysts fear that the chaos in China’s market could prove to be more of a risk worldwide than the crisis now playing itself out in Greece and the U.S.is worried that the stock market crash could jeopardize Beijing’s economic reform agenda.
The decline in Chinese stocks has called into question a policy that China’s government has attempted to put into effect since May 2014 in an effort to modernize market functions.
The People’s Bank of China has cut interest rates to a record low, brokerages have committed to buy billions worth of stocks, and regulators have announced a de-facto suspension of new IPOs.
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The relief rally came as Liu He, a top economic adviser to President Xi Jinping, told reporters on the sidelines of the BRICS summit in Russian Federation that neither the Chinese economy nor its stock market were in bad shape. Other markets turned from losses to gains. “But it is far from calling it a victory for the rescuers as more than half of listed companies are not trading”.
