Ministry probes ‘malicious short-selling’
Print Edition
CHINESE stocks rallied yesterday to ease previous losses as securities regulators banned massive sell-offs that had caused a market rout.
The Shanghai Composite Index rose 5.76 percent, or 202.14 points, to 3,709.33 points, while the Shenzhen Component Index, which tracks the second exchange on the mainland, was up 4.25 percent to 11,510.34 points.
Shares of more than 1,200 listed companies in the two markets increased with securities companies, industrial companies and nuclear utilities leading the gainers.
China Eastern Airlines Corp, liquor producer Luzhou Laojiao Co and pharmaceutical company Beijing Tongrentang Co all rallied by the 10 percent limit.
No listed firms dropped yesterday, while trading at some 1,400 firms remains suspended.
Hong Kong’s Hang Seng index closed up 3.7 percent to 24,392.79 points in the day.
Officials have unveiled a series of market-boosting measures almost every day over the past two weeks to reverse the rout, with shares having lost more than 30 percent of their value since a spectacular bull run ended with a peak on June 12, driven lower by restrictions on margin trading, concerns about overvaluations, and fears of further losses.
“As China beefs up its efforts to rescue the market with even the public security ministry involved, market sentiment is recovering slightly,” Bloomberg News reported, citing Qian Qimin, an analyst at Shenwan Hongyuan Group Co in Shanghai.
“The rise today may help ease some selling pressure when companies resume their shares from trading, but whether it’s sustainable will depend on what policies are coming next,” Qian was quoted as saying.
On Wednesday, the China Securities Regulatory Commission banned major stockholders from selling stakes in listed companies for six months. Investors with stakes exceeding 5 percent must maintain their positions in order to maintain capital-market stability amid an “unreasonable plunge” in share prices, the regulator said.
It also announced yesterday the buying of public offerings of funds to inject liquidity to fund companies to help professional institutional investors stabilize the capital market.
The buy-in will be carried out through the China Securities Finance Corp, the country’s only institution to provide margin financing loans to securities companies, CSRC spokesman Deng Ge said.
Meanwhile, the China Banking Regulatory Commission said it would permit financial institutions to roll over loans-backed shares, and encourage interbank lending between the country’s margin lender and banks to support stability in the capital markets.
Also yesterday, the Ministry of Public Security launched an investigation into “malicious short-selling” on the domestic stock markets and are keeping a close watch on any rumors that might provoke market panic, Xinhua news agency reported.
Short-selling is the selling of stock a trader does not own, in anticipation of a future fall in prices.
Meng Qingfeng, vice minister of public security, led a team to the Beijing headquarters of the CSRC yesterday morning.
The investigation shows that authorities will “punch back” against illegal activities with a “big fist,” Xinhua said
Other experts see the previous slump and the volatility as creating chances to buy-in and say there will be no derailment of the real economy since the fundamentals haven’t changed.
Roger Xie, head of global equity strategy at HSBC Holdings, upgraded his view on the market to neutral from underweight yesterday, and lifted HSBC’s target for the benchmark gauge to 4,000 from 3,400 by year end.
“The balance of margin financing dropped over 22 percent, or 500 billion yuan (US$81.76 billion) from the peak in mid-June, and the worst of the deleveraging might be behind us,” said Xie.
“The regulator has more options at its disposal to stabilize the market and restore confidence. Most important, fundamentals could improve in the second half of 2015.”
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