Chinese stocks surge after posting biggest intraday swing since 1992

A Chinese worker looks at quotes at the Stock Exchange in Shanghai
Photo by Kevin Lee/Bloomberg News

Chinese stocks rallied, sparking the benchmark index’s biggest intraday swing since 1992, on speculation the government will take steps to prevent bear-market losses from deepening.
The Shanghai Composite Index rose for the first in four days yesterday, jumping 5.5 percent to 4,277.22 at the close, the most since March 2009. The gauge swung 432 points from the highs and lows, propelling a volatility measure to a seven-year peak. An industry group representing brokerages called on investors and fund managers to take responsibility to stabilize the market after a weekend interest-rate cut failed to stem a rout.
“After the recent correction, investors might think stocks are oversold and hope regulators will introduce further measures to support the market,” said Shen Zhengyang, an analyst at Northeast Securities Co. in Shanghai. “The fund industry association’s remarks on stocks might also have boosted investor confidence.”
Speculation is growing that policy makers are preparing stock-boosting measures after the Shanghai Composite plunged more than 20 percent from a June 12 peak amid surging valuations and concern record high levels of borrowing to buy stocks were unsustainable. The Economic Observer reported the government is considering steps including a reduction in the stamp tax, while the finance ministry said it will allow the pension fund to invest in shares.
The government is considering a delay in the initial public offering of China Nuclear Engineering Corp., according to people with knowledge of the matter. The delay is being considered because of current market conditions, said the people, who asked not to be identified because the information is private.
The CSI 300 Index jumped 6.7 percent. Hong Kong’s Hang Seng Index added 1.1 percent, while the Hang Seng China Enterprises Index climbed 2.3 percent. The ChiNext gauge of small companies rebounded 6.3 percent.
Also helping stocks to reverse losses in the afternoon were statements from industry bodies representing asset managers and brokerages. China’s Asset Management Association urged investors to look at market risks from a long-term and rational perspective. The Securities Association of China said forced liquidation of margin lending through non-brokerages is “small” as a percentage of stock turnover.
“The latest comments by the Securities Association of China showed an intention to further appease the market and prevent worries over stock financing from spreading further,” Chen Jiahe, a Shanghai-based strategist Cinda Securities Co., said by phone. “Panic selling may have come to an end after the recent correction.” Kyoungwha Kim, Bloomberg