China stocks swung wildly before ending in positive territory on Friday after regulators suspended a market 'circuit breaker' mechanism and the central bank set a firmer midpoint rate for China's currency.
China's CSI300 index of the largest listed companies rose 2.0 percent, to 3,361 points on Friday. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 1.05 percent to 1,978 on turnover of 437.4 billion yuan ($66.4 billion or 61 billion euros).
During the first week of 2016, China stocks lost roughly 10 percent in what was their worst weekly performance since the market crashed in August last year.
The improved sentiment on Friday came after China announced late on Thursday that it had suspended its new stock market circuit breaker introduced only on Monday. The plan was brought in as part of a scheme to prevent the market volatility that wiped trillions of dollars off valuations last summer.
But dealers said it instead heightened selling pressure from traders who were desperate to avoid being stuck with shares they did not want to hold.
Analysts said Friday the reversal of the policy injected new life into the market.
Tian Weidong, analyst at Kaiyuan Securities, said the market was "back to normal" as investor could again sell and buy as they wish. "Under the circuit breaker mechanism, the market was suffocated," he told the news agency Reuters.
China stocks rose across the board on Friday, with the resources sector surging more than 6 percent and energy shares jumping over 5 percent.
Analysts attributed the rise in those sectors to Beijing's efforts to reduce excess capacity, which investors believe will lead to industry consolidation and benefit major listed players.
Central bank U-turn
The People's Bank of China (PBOC) also helped soothe markets by setting a stronger yuan midpoint rate against the US dollar.
On Friday, PBOC set the daily reference rate at 6.5636 to the greenback, up 0.02 percent from Thursday, when it was set at its lowest level in nearly five years. China limits the yuan to rising or falling two percent on either side of the reference rate. Eight days of falls had revived concerns over the currency of the world's biggest trader in goods.
Yoshinori Shigemi, global market strategist at JPMorgan Asset Management, told Reuters the PBOC's Friday setting was "a signal it does not intend to keep allowing the yuan to fall."
uhe/xxx (Reuters, AFP, dpa)