Hong Kong, Shanghai, and Shenzhen stocks all jumped to close higher on Monday, in the wake of a flurry of Chinese government moves to boost battered confidence in the economy and the market.
The Shanghai Composite Index, mainland China’s benchmark gauge, finished 4.1 per cent higher at 2,654.88, the biggest single-day increase in two and a half years.
Chinese stocks have been the worst performers this year across the globe. Before Monday, the Shanghai Composite Index had dropped 23 per cent this year on concerns over the economic downturn and an escalating trade war between China and the US.
The turnover for A shares, yuan-denominated shares, listed on the Shanghai exchange, reached 197 billion yuan (US$28.4 billion), the biggest daily amount in three months.
On the tech-heavy Shenzhen stock exchange, the Composite Index and the Component Index both advanced 4.9 per cent. The start-up board index, the ChiNext, pushed up 5.2 per cent.
Combined turnover on the Shanghai and Shenzhen exchanges soared 76 per cent from the previous session to 422 billion yuan.
Hong Kong stocks also received support, with the benchmark Hang Seng Index gaining 2.3 per cent to close at 26,153.15, the biggest increase in a month.
The Hang Seng China Enterprises Index, which tracks Hong Kong-listed Chinese companies, gained 2.6 per cent at 10,490.67.
Turnover on the main board increased 15 per cent from Friday to HK$114 billion.
Officials have stepped in with a range of pledges designed to calm investors, from tax cuts to setting up bailout funds for struggling listed companies, as well as pep talks from the top leadership.
“All the high-profile officials’ efforts to stabilise the market have made investors think the market is showing signs of bottoming out, and that there will be more policies coming out to sustain the market,” said Gordon Tsui Luen-on, managing director of Hantec Pacific.
China’s local governments are discussing with a number of domestic securities firms the possibility of working together to set up bailout funds to improve ease the liquidity problems facing struggling listed companies. That could be a win-win situation for companies, the government and securities firms, the state-run China Securities Journal reported on Monday.
On Sunday, Chinese President Xi Jinping said private enterprises have been an important force driving China’s economic and societal development since the country began to open up and implement reforms 40 years ago, according to a report by the state-run Xinhua News Agency.
It has been “a consistent policy for the Communist Party to support private business,” Xi said.
The remarks are seen as a response to growing concerns about the country’s private sector amid the recent stock market rout.
On Saturday, Chinese Vice Premier Liu He, the country’s economic mastermind, convened the Financial Stability and Development Committee for the 10th time in two months, amid the worst stock market sell-off in nearly four years.
The team, which is under the State Council and oversees the country’s financial regulation, vowed to “quickly implement and put in place” policies to stabilise the market and encourage long-term funds to enter the market.
On Saturday, China also unveiled a plan to cut personal income tax, allowing taxpayers to claim deductions for expenses on education, health care, mortgage interest or rent, and supporting the elderly.
Separately, China’s stock market regulator announced it would shorten the gap period to six months from three years for companies that plan to restructure to list again, if their first application for an initial public offering is rejected.
This is likely to result in more back door listings.
The China Securities Regulatory Commission (CSRC), which has tightened approvals of public offering applications since last year, said the move was intended to encourage high-quality private companies to participate in listed companies’ mergers, acquisitions and restructuring, to enhance the quality of listed firms.
Financial stocks led the advance on Monday on the back of the CSRC regulation loosening and reports about bailout funds, with many brokerages rising by their 10 per cent daily limit.Everbright Securities jumped 10.1 per cent to 9.3 yuan, Citic Securities climbed 10 per cent to 16.92 yuan, and Huaan Securities surged 10.1 per cent to 4.68 yuan.
The actions by the financial stability team and the market watchdog follow a rare coordinated effort by Liu and financial regulators to voice support for the market on Friday.
The Shanghai Composite Index surged by 2.6 per cent on Friday, its biggest one-day gain since August 7.
China on Friday reported that its GDP expanded by 6.5 per cent in the third quarter from the same period last year, the slowest pace of growth since 2008.
In Hong Kong, securities firms also shot up. Haitong Securities soared 14.6 per cent to HK$7.55. Citic Securities gained 12.3 per cent to HK$13.72. Huatai Securities also rose 12 per cent to HK$12.32.
Technology and consumer stocks advanced. Internet giant Tencent rose 3.3 per cent to HK$291.20. Clothing manufacturer Shenzhou International Group gained 4.4 per cent to HK$86.50, and snack supplier Want Want China jumped 3.2 per cent to HK$5.90.