SHANGHAI: Shanghai stocks closed up 2.41 per cent on Monday in a day of rollercoaster trading after authorities unveiled an unprecedented package of measures designed to shore up a plunging market.

Despite the gain for the day, analysts question whether levels are sustainable following a huge run-up in Chinese shares over the past year.

Losers outnumbered winners with the market getting most support from huge gains in state-run firms.

Until last month mainland Chinese markets were among the world’s best recent performers, with Shanghai rising more than 150pc in a spectacular borrowing-fuelled bull run in the 12 months to its top on June 12.

But it plunged almost 30pc over the three weeks to Friday, prompting the government to intervene over the weekend on concerns the slump could threaten the broader economy.

On Sunday, the government said the central bank would provide funds through the state-backed China Securities Finance Co. to “protect the stability of the securities market”, according to exchange watchdog the China Securities Regulatory Commission (CSRC). It gave no amount but state media said the funds would be used to “revive” the bourse. The CSRC also said Sunday there would be no initial public offerings (IPOs) “in the near future”, according to a separate statement. State media said 28 companies’ flotations have been postponed.

Chinese regulations mean new share issues offer near-guaranteed profits and so drain funds from the rest of the market, hurting prices.

“This type of state-led market-saving has never been seen before, even when the market crashed during the (2008)financial crisis,” Zheshang Securities analyst Zhang Yanbing told AFP.

On Saturday, China’s 21 largest brokerages said they would invest at least 120 billion yuan ($19.3 billion) in so-called “blue chip” exchange traded funds (ETFs).

“The market is quite sceptical about those measures,” Paul Chan, Hong Kong-based chief investment officer for Asia ex-Japan at Invesco, told Bloomberg News.—AFP

Read more: China hunts for ‘manipulators’ as stocks tumble

Published in Dawn, July 7th, 2015

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