Photographer: Johannes Eisele/AFP via Getty Images

Dip Buyers Rescue China Stocks as Leverage Crackdown Intensifies

Updated on
  • Xi Jinping says financial security basis of a healthy economy
  • Shanghai shares are among world’s worst performers in April

Chinese shares steadied as investors assessed the government’s intensifying focus on tackling risks in the financial system.

The Shanghai Composite Index added 0.4 percent to 3,152.187 at the close, reversing losses of as much as 1.4 percent that briefly erased the benchmark’s gains for the year. Technology, energy and consumer shares led the rebound, while the ChiNext small-cap gauge rallied after approaching its lowest level since September 2015, the biggest intraday turnaround in three months.

Stocks in China have lagged all but six national benchmarks in the world this month as the ruling Communist Party shifted its focus to reducing leverage. Financial security is “strategically important” to the country’s economic and social development, President Xi Jinping said at a meeting of China’s top politicians on Tuesday.

While mainland investors haven’t welcomed the scrutiny, with flows increasing into Hong Kong equities via exchange links, foreign funds are more upbeat.

“If we see the market go down further, it could be an attractive level to buy as the measures will not change the fundamentals of the companies we like nor the broader economic landscape,” Catherine Yeung, investment director at Fidelity International, wrote in emailed comments. “The control risks on leveraged trading in the long-term are positive to the Chinese markets.”

QuickTake Q&A: China Ups the Ante in Bid to Quash Financial Risk

Hong Kong’s Hang Seng Index climbed 0.5 percent to close at its highest level since July 2015 as financial firms rose for a sixth day. The Hang Seng China Enterprises Index fell 0.6 percent.

Data on Thursday showed Chinese industrial profits rose 23.8 percent in March from a year earlier, compared to an 8.5 percent rise last year.

  • Sands China Ltd. dropped 3.5% in Hong Kong trading. Its parent company’s 15% sales jump in China in the first quarter trailed gains reported by rival casino operators in the region.
  • Minth Group Ltd. sank 11% after saying Chin Jong Hwa will be the auto-parts maker’s new chairman and chief executive officer in September.
  • AIA Group Ltd. rose 6.2% in Hong Kong to its highest closing price on record after the insurer said the value of its new business surged 53% in the first quarter.

— With assistance by Emma Dai

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