China’s benchmark stock index capped the biggest gain since 2009 in volatile trading as the government battled to restore investor confidence in a market that lost $3.9 trillion in less than a month.
The Shanghai Composite Index jumped 5.8 percent to 3,709.33 at the close, erasing a loss of much as 3.8 percent. About 600 stocks rose by the daily 10 percent limit on the benchmark index. Another 1,439 companies were halted on mainland exchanges, locking sellers out of 50 percent of the market.
Officials have unveiled market-boosting measures almost every night over the past two weeks to reverse the rout in the world’s second-largest stock market. Regulators late Wednesday banned major stockholders from selling stakes in listed companies, while announcing Thursday banks can roll over loans backed by shares. China’s public security bureau is also stepping in to investigate “malicious” shorting of stocks, the official Xinhua News Agency reported Thursday.
“As China beefs up its efforts to rescue the market with even the public security ministry involved, market sentiment is recovering slightly,” said Qian Qimin, an analyst at Shenwan Hongyuan Group Co. in Shanghai. “The rise today may help ease some selling pressure when companies resume their shares from trading, but whether it’s sustainable will depend on what policies are coming next.”
The government widened the scope of its measures after earlier interventions failed to stop the selloff. Foreign traders sold Chinese shares at a record pace in the first three days this week in part due to concerns over the government’s meddling in markets, while traders liquidated a record amount of margin trades on Wednesday.
Traders unloaded a record 112 billion yuan ($18 billion) of shares purchased with borrowed money on the Shanghai exchange Wednesday, the 13th straight day of declines. A five-fold surge in margin debt over the 12 months through June 12 had helped propel the Shanghai index to a more than 150 percent gain.
While the median price-to-earnings ratio in China has dropped to 53 from 108 at the height of the rally, valuations are more than twice as high as those on the Standard & Poor’s 500 Index.
“It’s government buying first and then bargain hunters are following,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees about $3.3 billion. “The rebound may be sustainable in the short term. Once those companies that are suspended resume trading, these stocks may see one last sell-off. But the biggest panic is over.”
The CSI 300 Index rallied 6.4 percent. Hong Kong’s Hang Seng China Enterprises Index advanced 3.1 percent at the close, while the Hang Seng Index jumped 3.7 percent after recording its biggest intraday decline since 2008 on Wednesday.
President Xi Jinping’s government is intensifying efforts to combat the market turmoil as policy makers seek to maintain confidence in the nation’s leadership and prevent a crash from weighing on the weakest economic expansion since 1990. China now has more than 90 million individual investors, outnumbering members of the Communist Party.
The China Securities Regulatory Commission banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months. Investors with stakes exceeding 5 percent must maintain their positions in order to maintain capital-market stability amid an “unreasonable plunge” in share prices, the regulator said in a statement.
Eight out of 10 industry gauges in the CSI 300 jumped at least 5.9 percent, led by industrial, consumer-staple and health-care companies. China Eastern Airlines Corp., liquor producer Luzhou Laojiao Co. and Beijing Tongrentang Co. all rallied by the 10 percent limit.
Data on Thursday showed the nation’s consumer prices rose faster than economists forecast in June, easing deflation pressure at home and abroad.
The consumer-price index increased 1.4 percent last month from a year earlier, according to the National Bureau of Statistics. That compared with the 1.3 percent median estimate in a Bloomberg survey. The producer-price index fell 4.8 percent, extending declines of more than three years.
CSI 300 July futures rallied 10 percent. Xinhua reported that the public security ministry will team with the CSRC to investigate evidence of “malicious” shorting of stocks and indexes. Short selling, which allows traders to wager on rising and falling markets, is allowed in China on futures contracts linked to the CSI 300, SSE 50 and CSI 500 indexes.
Citic Securities Co. led gains on the H-shares gauge, surging 18 percent. China’s largest-listed brokerage had slumped 32 percent during a five-day rout.
Fund managers from LGT Group and AMP Capital Investors said there is an opportunity to buy Hong Kong shares as authorities stand ready with steps to boost the mainland’s economy.
“Sentiment has gone from optimism to extreme pessimism now,” said Nader Naeimi, Sydney-based fund manager at AMP Capital, which oversees A$160.5 billion. “Valuations are much more attractive,” he said, adding that he increased his allocation to H-shares on Tuesday.
(An earlier version of the story corrected the level of the Shanghai Composite Index.)
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— With assistance by Shidong Zhang