MARKETS-CHINA China shares grow after days of turmoil

Record ID: 147718

  • Title: MARKETS-CHINA China shares grow after days of turmoil
  • Date: 10th July 2015
  • Summary: HONG KONG, CHINA (JULY 10, 2015) (REUTERS) HONG KONG STOCK EXCHANGE SQUARE FLAGS OF HONG KONG EXCHANGE, HONG KONG AND CHINA CAMERAPERSON FILMING INSIDE EXCHANGE STOCK INFORMATION ON ELECTRONIC TICKER SINGAPORE (JULY 10, 2015) (REUTERS) MIZUHO BANK SENIOR ECONOMIST, VISHNU VARATHAN, SPEAKING DURING INTERVIEW (SOUNDBITE) (English) MIZUHO BANK SENIOR ECONOMIST, VISHNU VARATHA
  • Embargoed: 25th July 2015 13:00
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  • Topics: General
  • Reuters ID: LVA2DF8ADRK3S5B3BH1WH3CNEUM9
  • Aspect Ratio: 16:9
  • Story Text: Chinese stocks rose strongly for a second day on Friday (July 10), buoyed by a barrage of government support measures, but worries remained about the long-term impact four weeks of stock market turmoil may have on the world's second-largest economy.
    The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen rose another 6.1 percent on Friday, while the Shanghai Composite Index .SSEC gained 5.4 percent.
    Over the past two weeks Chinese authorities have cut interest rates, suspended initial public offerings, relaxed margin lending and collateral rules and enlisted brokerages to buy stocks, backed by cash from the central bank.
    Vishnu Varathan, a senior economist at Mizuho Bank, stressed how these moves might work in stabilizing the markets now, but that they were by no means offering a long term remedy.
    "If markets do not stabilize on their own account and with more sustainable dynamics, then China may have to do more. But for now the easing on margins seems to have been a key move in stabilizing, and the irony around that is it's not lost on people. I mean, it is exactly the margin that China initially was trying to tackle and caused a lot of the instability, so this is not a panacea in itself," he said.
    Varathan also expressed his concern about the sluggish global market which would weigh down the now fragile Chinese markets.
    "So, if overall global market sentiments do not keep improving, the risk is that China could slide back. And to that extent, even if it's not a dead cat bounce per se, it would not be a one-way recovery path for Asian stocks, so we should still be braced for more volatility and certainly for bouts of sell-offs," he added.
    Some analysts predict further moves to come from the central bank, which often makes policy announcements over the weekend, such as another rate cut or relaxation of the amount of cash banks must hold as reserves.
    The frantic efforts to stem the market slide finally began to gain traction on Thursday (July 9), when shares rose around 6 percent after the securities regulator banned shareholders with large stakes in listed firms from selling.
    Chinese investors nevertheless remained confident.
    "This round of market will at least last to 2016, even 2017. So, I'm still optimistic. I think (the recent fluctuation) is just short term turmoil and short term bearishness. In the long term, it's an absolutely bullish market," said 25-year-old investor, surnamed Mi, in Beijing.
    "Over the past one or two years, China's economy was not very good. But over a middle or long term, China's economy will gradually enter a stage, as is called by the central government, of a "new normal", which will be much healthier," said Yu, a 35-year-old investor.
    Some other investors, however, blame the government for the turmoil.
    "It's not good for (a country) who did not control the scale of securities margin and trading well. They did not run the country very well and they did not control and manage the stock markets. What is China Securities Regulatory Commission doing? They should have controlled it very early. Now, it's too late to control it. (The markets) plunged so badly. It's the worst in history," said Gao, a 70-year-old investor in Shanghai.
    Around 1,300 of China's listed companies - nearly half the market - remained suspended after a scramble by firms earlier in the week to escape the carnage by having trading in their stock halted. About 60 companies resumed trading on Friday.
    Many of those that remained trading, meanwhile, were propped up by state-directed buying.
    On Friday, Shanghai Securities News reported that insurers had brought 112.3 billion yuan ($18.1 billion) of equity since the rout began.
    The plunge in China's previously booming stock markets, which had more than doubled in the year to mid-June, has created a major headache for President Xi Jinping and China's top leaders, who are already grappling with slowing growth.
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