Afternoons in the Chinese stock market have turned into a waiting game for the state-backed funds to arrive.
Over each of the past four days, the SSE 50 Index of some of the nation's largest companies has rebounded by an average 6.4 per cent in late trading from session lows. The gauge has surged 15 percent over the four-day period, its biggest rally since 2008 and twice the 8.1 per cent gain by the Shanghai Composite Index. The large-cap gauge climbed 0.9 per cent at the close on Tuesday to erase an earlier 4.8 per cent loss.
The rallies are driven by government-backed funds buying shares to stabilise the market before a World War II victory parade on Thursday, according to IG Asia Pte Ltd. Margin traders cut leveraged bets by a net $10 billion during the period to the lowest level since December 25, suggesting sustained selling pressure among China's 90 million individual investors.
"When you see a straight line buying pattern in the last 45 minutes, that's usually the national team supporting the market," said Michelle Leung, chief executive officer of Xingtai Capital Management Ltd in Hong Kong. "When you track market opens or you track outstanding margin balance, we could see the bulk of retail investors selling."
The government revived its intervention in equities on Thursday to halt the biggest sell-off since 1996. The effort to support markets was part of a broader push to ensure nothing detracts from the parade, which is the government will use to demonstrate its rising military and political might. China's financial markets will be shut Thursday and Friday to commemorate the event.
Lenders surge
Banks led the last-minute rally by the SSE 50 gauge on Tuesday. Industrial & Commercial Bank of China Ltd jumped 7.4 per cent, erasing a 0.5 per cent loss. Agricultural Bank of China Ltd advanced the most since July 7. The Shanghai Composite dropped 1.2 per cent as more than 300 members fell by the daily 10 per cent limit.
China's securities regulator asked brokerages to step up their support for share prices by contributing 100 billion yuan ($15.7 billion) to the nation's market rescue fund and increasing stock buybacks, according to people familiar with the matter. The China Securities Regulatory Commission gave the order at a meeting with representatives of 50 brokerages on Saturday, which CSRC Chairman Xiao Gang also attended, said the people who asked not to be identified because the meeting hasn't been made public.
Investors should be wary about assuming the pattern of afternoon rallies will continue over the long term, said Bernard Aw, a strategist at IG Asia in Singapore.
"I don't expect this intervention to continue in such a successive fashion longer out," Aw said.
"I will still sit tight and await better valuations."
Over each of the past four days, the SSE 50 Index of some of the nation's largest companies has rebounded by an average 6.4 per cent in late trading from session lows. The gauge has surged 15 percent over the four-day period, its biggest rally since 2008 and twice the 8.1 per cent gain by the Shanghai Composite Index. The large-cap gauge climbed 0.9 per cent at the close on Tuesday to erase an earlier 4.8 per cent loss.
| THE DRAGON BREATHES FIRE |
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The rallies are driven by government-backed funds buying shares to stabilise the market before a World War II victory parade on Thursday, according to IG Asia Pte Ltd. Margin traders cut leveraged bets by a net $10 billion during the period to the lowest level since December 25, suggesting sustained selling pressure among China's 90 million individual investors.
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"When you see a straight line buying pattern in the last 45 minutes, that's usually the national team supporting the market," said Michelle Leung, chief executive officer of Xingtai Capital Management Ltd in Hong Kong. "When you track market opens or you track outstanding margin balance, we could see the bulk of retail investors selling."
The government revived its intervention in equities on Thursday to halt the biggest sell-off since 1996. The effort to support markets was part of a broader push to ensure nothing detracts from the parade, which is the government will use to demonstrate its rising military and political might. China's financial markets will be shut Thursday and Friday to commemorate the event.
Lenders surge
Banks led the last-minute rally by the SSE 50 gauge on Tuesday. Industrial & Commercial Bank of China Ltd jumped 7.4 per cent, erasing a 0.5 per cent loss. Agricultural Bank of China Ltd advanced the most since July 7. The Shanghai Composite dropped 1.2 per cent as more than 300 members fell by the daily 10 per cent limit.
China's securities regulator asked brokerages to step up their support for share prices by contributing 100 billion yuan ($15.7 billion) to the nation's market rescue fund and increasing stock buybacks, according to people familiar with the matter. The China Securities Regulatory Commission gave the order at a meeting with representatives of 50 brokerages on Saturday, which CSRC Chairman Xiao Gang also attended, said the people who asked not to be identified because the meeting hasn't been made public.
Investors should be wary about assuming the pattern of afternoon rallies will continue over the long term, said Bernard Aw, a strategist at IG Asia in Singapore.
"I don't expect this intervention to continue in such a successive fashion longer out," Aw said.
"I will still sit tight and await better valuations."