MARKET BLEEDING EASES
An unprecedented battery of measures to pump up the market has showed early signs of recovery and has boosted investor confidence.
Chinese shares posted a strong rally on Thursday, with the benchmark Shanghai Composite Index (SCI) leaping 5.76 percent to finish at 3,709.33 points.
The Chinese stock market was among the world's best performers earlier this year, with the SCI surging more than 150 percent within 12 months, partly fueled by margin trading, as some investors borrowed money to buy shares.
As margin traders began to unwind their positions and some investors cashed out, the market has taken a nosedive since mid-June with the index losing more than 30 percent as of Wednesday from the recent peak on June 12, and many shares' value had halved.
Measures over the past weeks to bolster market confidence included major brokerages putting their own capital into the market, rules changing to allow pension funds to own stocks, and a trading cap on stock index futures.
The state asset regulator ordered centrally administered state-owned enterprises (SOEs) to hold shares in their listed companies amid "abnormal market volatility", and the regulator eased rules for insurance companies to step up to the plate to invest more in blue-chips.
Government agencies on Thursday continued to make concerted efforts to halt the stock rout, with the police joining the securities regulator to investigate "malicious short selling."
Different from advanced economies, many investors in the Chinese stock market are individuals. Some argue that the recent correction will be a lesson for them and will only help to establish a more rational market.
The recent "perfect storm" will teach investors about risk and reward as well as value-oriented investment, banking giant HSBC said in a recent research note.
After the market correction, the equity market is likely to stabilize off the back of the long list of supportive moves, and many shares will be too cheap to ignore, analysts have said.
"Following weeks of decline, investors' willingness to further sell has declined and the SCI is expected to bottom out gradually," said Chen Jianhua, an analyst with Yintai Securities.
