China: Stocks rebound after regulator comment, GDP

[SHANGHAI] Chinese shares rebounded on Tuesday from their biggest tumble since the global financial crisis the day before, after the stock regulator denied speculation it had intentionally sought to suppress the market's rally.

The market also took some comfort from China's fourth-quarter growth data, which came in better than expected, but that had only a marginal impact on stocks.

Analysts said the focus of investors remained on capital flows rather than economic fundamentals. "The GDP data looks to have had some positive impact but the key focus will still be capital flows," said Wang Weijun, an analyst at Zheshang Securities in Shanghai.

He said the market had risen sharply over the past few months and was poised for a correction. China's key share indexes rose 40 per cent in the fourth quarter.

The CSI300 index rose 1.2 per cent, to 3,395.30 points at the end of the morning session, while the Shanghai Composite Index gained 1.8 per cent, to 3,172.72 points.

On Monday, both the CSI300 and SSEC indexes fell 7.7 per cent, their biggest one-day percentage drop since June 2008 after regulators moved to crack down on credit products which were blamed for fuelling speculation in the stock market over the past few months.

However, the China Securities Regulatory Commission (CSRC), which punished industry heavyweights for illegal operations in their margin trading, said such market talk it was deliberately muzzling a stock rally "is not consistent with facts".

Bank shares, which fell nearly 10 per cent on Monday, recovered, with the sub-sector index gaining around 1 per cent. But the financial sector remained weak, with many brokerages continuing their decline. "Investor sentiment was undoubtedly hurt by the margin trading news despite CSRC saying they did not intend to dampen the stock market," said Liu Jingde, analyst at Cinda Securities in Beijing. "I expect the market to be quite volatile in the near term although over the longer term, it is still a bull market." China CSI300 stock index futures for February rose 2.8 per cent, to 3,414.2, 18.90 points above the current value of the underlying index.

The CSI300 index was pushed up by the real estate sub-index which rose 2.86 per cent and the infrastructure sub-index, which gained 2.33 per cent.

Shenzhen's ChiNext, dominated by small caps and technology stocks, was up 2.98 per cent.

In Hong Kong, the Hang Seng index added 0.7 per cent, to 23,910.32 points.

The Hong Kong China Enterprises Index gained 2.3 per cent, to 11,741.21.

REUTERS