One gain and three declines, with the weekly loss still in excess of 10% despite yesterday’s late surge higher.
That’s the scoreboard for China’s stock market this week with the crazy intraday movements likely to be the center of investor attention yet again today.
It’s been a wild week for the nation’s stock market, even by usual standards.
On Monday the benchmark Shanghai Composite fell by 8.49% – it’s largest daily percentage decline since February 2007 – before following that up with a 7.63% drop on Tuesday – taking the two-day loss to over 15% – the largest decline over two trading sessions since December 1996. On Wednesday the index continued to decline despite a dual rate cut and reduction in the bank reserve ratio requirement from the PBOC on Tuesday evening.
Then came Thursday, and what can only be described as an insane rally in the final 46 minutes of trade.
The index, down nearly 1% after being higher for most of the session, staged a dramatic late turnaround, surging 6.11% to close up over 5%.
There were rumors that the government – through its intermediaries – was determined to manufacturer a rally in stocks before a huge military parade on September 3 that commemorates the end of World War 2.
It sounds ridiculous that the government would think a stock market rally would be the best way to mark the historic event, but it shouldn’t come as a surprise.
At present tens of thousands of factories, construction sites and steel mills are currently shut around the capital to guarantee blue skies for their big parade.
So what happens today – will the rebound continue or are Chinese stocks due another bath?
According to IG Markets chief market strategist Chris Weston, while the governments form in preventing stock market losses has been poor of late, he wouldn’t be looking to get short today.
Here’s Weston.
“Chinese markets could underpin Asia once again, with the Stabilization Fund speculated at buying blue chip stocks yesterday. I thought it was quite fitting that the Chinese authorities want a stable stock market ahead of the 3 September war commemorations and while it hasn’t occurred of late, this time around I suspect the authorities are going to get their wish. In the very short-term, I would not be betting against the Chinese wishes here”.
On top of the suspected government involvement yesterday, there are now rumors circulating that the China Securities Financing Corporation, the agency responsible for arranging margin financing to purchase Chinese stocks, is looking to raise 1.4 trillion yuan in funding in order to facilitate yet another stock market rescue.
It will be interesting to see whether that rumor, if true, is enough to sustain the rally in stocks today.
Chinese stocks will resume trade at 11.30am AEST.
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