Shanghai - China’s stocks headed for their longest stretch of gains in almost two months, amid speculation the government’s market-support measures have tempered wild price swings as smaller companies extended a bull-market rally.
The Shanghai Composite Index advanced for a fourth day, climbing 0.9 percent to 4 028.60 at 1:35 p.m. and heading for the first close above 4 000 since July 1. The ChiNext small-caps gauge, dominated by technology and new economy stocks, rose 1.5 percent, adding to gains of more than 20 percent since the July low. A total of 543 companies were suspended on mainland exchanges Tuesday, or 19 percent of all listings, down from 576 at the close on Monday.
The benchmark gauge has rebounded 14 percent since July 8, following a month-long rout that wiped out almost $4 trillion, as policy makers introduced a spate of measures to bolster equities. The Shanghai index on Monday posted the smallest price swings since the rout began.
“The 4 000 level is a key battlefield for bulls and bears,” said Li Jingyuan, GM of the securities investment department at Shanghai Zhaoyi Asset Management. “Once the psychological level is breached, investors will probably pile in again as they view that as a breakthrough of major resistance.”
The CSI 300 Index gained 0.7 percent. Hong Kong’s Hang Seng China Enterprises Index added 1 percent and the Hang Seng Index climbed 0.6 percent.
Worst Over
The Shanghai gauge’s 10-day volatility has fallen to the lowest level in a month after the government introduced measures including banning large shareholders from selling stakes, ordering state-run institutions to buy equities and suspending new share sales. Last week, people familiar with the matter said China Securities Finance, a state-backed agency that provides margin finance and liquidity to the market, has up to 3 trillion yuan ($483 billion) to support stocks.
Trading volumes in the Shanghai index were 19 percent below the 30-day average as price swings narrowed. The gauge traded within a range of 3 percentage points for a second day Tuesday.
“Chinese stocks may pass their worst period and return to their normal volatility,” Warut Siwasariyanon, the head of research at Asia Wealth Securities, said by phone in Bangkok. “But it’s unlikely that there will be another major rally the same as we saw earlier this year.”
Foreign investment
China’s foreign direct investment rose 0.7 percent in June, the commerce ministry said on Tuesday. That beat the median estimate of a 0.5 percent gain in a Bloomberg survey.
Margin traders increased holdings of shares purchased with borrowed money for a second day on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to 921.3 billion yuan.
Among ChiNext stocks, Rastar Group and Top Resource Conservation Engineering surged by the 10 percent daily cap.
Jiangxi Copper, China’s biggest producer of the metal, slipped 0.5 percent. Zijin Mining Group, the nation’s largest gold producer, lost 1.6 percent.
The Bloomberg Commodity Index slid to its lowest close since June 2002 on Monday, and mining stocks drove equity losses around the world, with selling heaviest among emerging-market resource producers.
Bloomberg