China Stocks Rise for Third Day Amid Suspected State-Fund Buying

  • PetroChina, China Life gain as Shanghai gauge erases losses
  • China is stepping up intervention after $5 trillion stock rout

Chinese stocks eked out a gain in late trading amid speculation state-backed funds intervened to support the market during annual policy meetings.

The Shanghai Composite Index rose 0.2 percent at the close, erasing a loss of as much as 1.4 percent, amid turnover that was 18 percent lower than the average. PetroChina Co., long considered a target of government buying because of its large index weighting, climbed for a second day. China Life Insurance Co., the fifth-most heavily weighted stock, jumped to a two-month high. China’s central bank has drafted rules for a levy on foreign-exchange trading that would help curb currency speculation, according to people with knowledge of the matter.

China is stepping up intervention in its financial markets after stocks extended last year’s $5 trillion selloff and the yuan fell to a five-year low in February. The Shanghai Composite has risen 6.6 percent this month amid suspected buying by state-backed funds in some of the nation’s biggest companies as policy makers gather in Beijing for the National People’s Congress that closes on Wednesday.

“As expected, the market staged a rebound toward the close as state institutions emerged to buy,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “The market is also waiting for some policy signals from the NPC today.”

The Shanghai gauge climbed to 2,864.37 at the close, capping a third day of advances. Gauges of consumer-staple and utility companies rose at least 1.4 percent on the CSI 300 Index, which advanced 0.3 percent. The Hang Seng China Enterprises Index declined 0.9 percent in Hong Kong, while the benchmark Hang Seng Index lost 0.7 percent.

The yuan traded in Hong Kong fell 0.18 percent to 6.5058 a dollar, heading for its biggest two-day retreat in four weeks.

The People’s Bank of China has drafted rules for a so-called Tobin tax that would help curb currency speculation, according to people with knowledge of the matter. The levy isn’t designed to disrupt hedging or other foreign-exchange transactions undertaken by companies, they said.

Late Recovery

PetroChina added 0.5 percent in Shanghai, helping a gauge of energy shares pare its loss to 0.8 percent. China Life jumped 6.3 percent, its biggest rally in three weeks.

The Shanghai Composite recorded intraday losses on a majority of days this month before staging a recovery and closing the session higher, with heavily-weighted companies on the gauge leading gains on suspected intervention.

Liu Shiyu, chairman of the China Securities Regulatory Commission, said this week it was too early to think about the state rescue fund leaving the market, while a new registration-based system for IPOs would take time. Liu vowed to step in “decisively” if needed to curb panic and defended intervention following last summer’s $5 trillion selloff.

The Shanghai Composite has lost 19 percent this year at Tuesday’s close, still the most among 93 global peers tracked by Bloomberg.

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