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China stocks bounce back after authorities and exchanges pledge support

By noon, the Shanghai Composite Index had gained 4.38% while the smaller Shenzhen Composite Index climbed 4.86% and the Hang Seng Index rose 2.37%.


Chinese stock markets saw renewed optimism on Monday after officials and stock exchanges issued public statements in a coordinated effort to prop up the markets.

Around 1.50pm, Singapore time, the Shanghai Composite Index gained 4.38% or 111.80 points, to 2,662.26 while the smaller Shenzhen Composite Index climbed 4.86% or 61.42 points, to 1,325.23. The Hang Seng Index also rose 2.37% or 604.60 points, to 26,166.00.

Meanwhile, other Asian markets saw a more muted trading. At about the same timing, Tokyo’s Nikkei 225 was up by 0.49% or 111.20 points, to 22,643.28, while Singapore's Straits Times Index edged up 0.35% or 10.57 points, to 3,073.08 points.

The afternoon performance for the Chinese exchanges improved from the morning. The markets opened with the Shanghai Composite Index up 0.59% or 15.17 points, to 2,565.64, the Shenzhen Composite Index up 0.93% or 11.72 points, to 1,275.53, and the Hang Seng Index edging up by 0.79% or 202.39 points, to 15,763.79.

On Friday, various Chinese officials and agencies issued statements expressing their support for China’s stock market and the country's economic performance.

Liu He, top economic advisor to Chinese President Xi Jinping noted in an interview with Chinese media that the sell-off in markets could be good for the stock market’s long-term development. He attributed the slide in the markets to China’s economic transition and the United States-China trade tensions.

Meanwhile, Liu Shiyu, chairman of China Securities Regulatory Commission, encouraged stakeholders such as government-managed funds, and qualified private equity investment funds to help public companies with good prospects who are facing operational issues to relieve their stock pledge difficulties, “so that they (the companies) can develop healthily”.

Shanghai and Shenzhen stock exchanges on Sunday also released statements saying they will be providing measures to support the equity market.

In two separate media releases, the Shanghai Stock Exchange said it will look at creating new funds to bail out companies that pledge their shares as collateral for loans while the Shenzhen Stock Exchange said it will work closely with local authorities and financial institutions to help companies on their exchange.

Both exchanges will be pushing for strategies like encouraging more dividend pay-outs, and mergers and acquisitions among listed companies.

The slew of measures from Chinese authorities show them lending a hand to shore up the Chinese stock markets following lacklustre economic results for the third quarter.

For July to September, China's economy grew by 6.5%, slower than the 6.6% increase economists in a Reuters poll expected and the 6.7% gain in the second quarter. The reading was the weakest quarterly year-on-year growth since the first quarter of 2009 which saw weak results in the aftermath of the financial crisis.

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