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August 28, 2015

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Shares up on belief government is buying

CHINESE shares rallied yesterday to halt the deepest five-day rout since 1996 amid speculation that the government had restarted buying in a bid to boost market confidence.

The Shanghai Composite Index rose 5.34 percent to 3,083.59 points, ending a 23 percent drop since last Thursday. It fluctuated during the morning session but rebounded sharply in the afternoon, with financial shares leading the way.

The 16 banks and five insurers listed in Shanghai and Shenzhen all soared, with Ping An Insurance Group Co, China’s second-biggest insurer, up by the 10 percent limit to 29 yuan (US$4.53) to become the top contributor in the sector. Bank of China increased 6.28 percent to 3.89 yuan.

The Shenzhen Component Index added 3.58 percent to 10,254.35 points.

“Heavyweight stocks helped pull up the index, and there’s a high possibility that state funds entered the market again to shore up stocks,” said Zhang Gang, a strategist at Central China Securities Co.

Confidence in the market was also boosted by curbs announced by China Financial Futures Exchange, with 164 investors in the stock futures market prevented from opening accounts for a month as punishment for “abnormal trades.”

The government previously allowed the China Securities Finance Corp to buy shares to stabilize the last market rout, but signaled at a media briefing on August 14 that it wouldn’t be intervening in the equity market this time.

“Despite the gains, we see that the market is showing a lack of energy from individual investors as those blue chips were not the most favorable shares that they would like to buy,” Zhang said.

Market turnover in Shanghai was 404.3 billion yuan yesterday, nearly 30 percent below its June 12 peak.

“This is the bounce we said on Monday was likely over the coming days,” Lim Say Boon, chief investment officer at DBS Bank wrote in a note. “But don’t get too happy about it — the fundamentals haven’t changed.”

Asian shares rose for a second day yesterday, with Hong Kong’s Hang Seng gaining 3.6 percent, Japan’s Topix up 1.4 percent and Australia’s S&P/ASX 200 rising 1.2 percent.




 

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