Chinese markets bounce back
July 9, 2015
China's broad CSI300 index of the largest listed companies in Shanghai and Shenzhen shot up 6.4 percent, while the Shanghai Composite Index rose 5.8 percent for its biggest daily percentage gain in six years.
The rises follow yet more attempts by the government to stop the rout in the markets, which is dominated by retail investors, exacerbating the current volatility. On Thursday, Chinese regulators banned shareholders with significant stakes in listed firms from selling. Shareholders who hold more than 5 percent of a company's shares must not reduce their holdings in the coming six months.
More than 1,400 companies have also been suspended from trading as of Thursday, representing around 50 percent of listed stocks, according to Bloomberg.
The authorities are also targeting short sellers, who bet on falling prices. Official news agency Xinhua said police were investigating suspected "malicious" selling of shares. The probe showed that the authorities would "punch back" with a "big fist" against illegal activities, Xinhua said on its microblog.
More than 25 percent has been knocked off the value of Chinese shares since mid-June, following an earlier stock market boom that saw the value of shares double in the year to mid-June.
The Chinese government, which had made handing a larger role to market forces a centerpiece of its economic reforms, has responded with a slew of support measures, including an interest rate cut, suspension of initial public offerings (IPOs) and enlisting brokerages to buy stocks, backed by cash from the central bank.
But many economists believe that while President Xi Jinping's plans to liberalize the Chinese markets may have suffered a setback, the stock market rout is unlikely to affect the wider economy.
However, commodities that are sensitive to the outlook for the world's second-biggest economy have been hit, with copper prices at a six-year low on Wednesday and iron ore - which is used to make steel - tumbling to a 10-year low, making it cheaper per ton than cabbage.
ng/jil (Reuters, AFP, dpa)