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Business / Markets

Stocks eke out gains amid State-backed buying

By Bloomberg (China Daily) Updated: 2016-01-06 08:35

Chinese mainland stocks rose in volatile trade as State-backed funds were said to intervene after a plunge on Monday wiped out $590 billion of market value.

The CSI 300 Index advanced 0.3 percent at the close after swinging between a gain of 1.4 percent and a loss of 2.7 percent. Trading was halted on Monday after the gauge plunged 7 percent, triggering new market circuit breakers that some analysts said exacerbated the sell-off.

State-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week's expiration date, according to people familiar with the matter. The China Securities Regulatory Commission also suggested it's open to tweaking the circuit breakers, while the central bank conducted the biggest reverse-repurchase operations since September.

"The government will be able to stabilize the stock market by both administrative orders and use of support funds," said Yin Ming, vice-president of Shanghai-based investment firm Baptized Capital. "The circuit breaker mechanism and concerns over share sale ban served as excuses to sell."

The Shanghai Composite Index lost 0.3 percent.

Equities slumped worldwide on Monday in the wake of the sell-off in mainland equities. Chinese stocks' influence on global markets has increased after the nation's $5 trillion equity market rout, when the Shanghai gauge tumbled more than 40 percent from mid-June through its August low, rattled investor confidence in the world's second-largest economy.

Chinese policymakers, who went to unprecedented lengths to prop up stock prices during a summer rout, are trying to prevent financial market volatility from weighing on an already-slowing economy. The nation's first economic reports of 2016 showed a series of interest rate cuts and increased fiscal stimulus have failed to boost flagging growth by the nation's manufacturers.

The central bank offered 130 billion yuan ($19.9 billion) of seven-day reverse repos on Tuesday at an interest rate of 2.25 percent. The overnight repurchase rate fell 1 basis point to 2.01 percent after climbing to its highest since April on Dec 31.

The Shanghai Composite's 10-day historical volatility was at 39.4, the highest since September.

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