Down $1 trillion, world's worst stocks near make-or-break level

In a Chinese stock market infatuated with round numbers, 3,000 has emerged as the latest fixation for investors trying to gauge the government’s commitment to ending a nearly $1 trillion selloff.

That’s the next big line in the sand for the Shanghai Composite Index, whose 13 percent slump since Jan. 24 has been the steepest worldwide. The benchmark equity gauge came within 1.4 percent of the 3,000 threshold on Wednesday, before rallying in the afternoon amid speculation state-run funds had stepped in to support the market.

The big question for investors is whether China’s so-called National Team is committed to defending 3,000, which proved to be a key level of support for stocks around this time last year. China’s government, which has a long history of market intervention, has recently shown signs of prioritizing financial stability as the economy grapples with escalating trade tensions, uninspiring growth figures and tightening liquidity conditions.

Wednesday’s rally “is an important signal that the national team may have entered the market,” said Zhang Gang, a Shanghai-based strategist at Central China Securities Co. “The national team is likely to defend the Shanghai Composite at 3,000. They need to hit the brake to prevent the selloff from accelerating.”

The Shanghai gauge closed 0.8 percent higher at 3,091.40, after earlier losing as much as 0.8 percent. Large-cap banks and oil companies, rumored to be the favored buying targets of state-run funds, were the biggest contributors to the rally.