It was another typically wild session for China’s stock market on Thursday, plunging on the open before staging a miraculous – and somewhat suspicious – rally into the close.
Having plunged by 2.4% on Wednesday, the session got off to another bad start with stocks slumping heavily on the open.
At one point the benchmark Shanghai Composite was down close to 3%, extending the losses from the high of December 23 last year to over 20%, the level that technically defines a bear bear market.
However, in what is quickly becoming a real life game of snakes and ladders, the market staged a remarkable turnaround in the latter half of the session.
As the 1-minute tick chart reveals below, courtesy of Thomson Reuters, it was nothing but one way traffic in the second half of the session with every tiny dip met with further buying pressure.
Technically very bullish, but also highly suspicious.
It had all the hallmarks of government intervention from China’s so-called “national team”, a collective group of state-backed financial firms tasked with rescuing the market during episodes of intense market selling.
Whether it was them, or actual non-government sponsored investors, will surely be debated.
At the final bell the Shanghai Composite closed with a gain of 2%, mirroring moves seen in other large-cap indices.
After being thumped on Wednesday, small-cap stocks outperformed with the CSI 500, Shenzhen Composite and tech-heavy ChiNext rising by 3.4%, 3.8% and 5.6% respectively.
According to Bloomberg, the latter rallied after 28 listed companies vowed to take action to stabilize the market, with some pledging not to sell shares over the next six months.
The gains in stocks came despite renewed weakness in the Chinese yuan, something that has caused concern both within and outside Chinese markets in recent weeks.
Having been fixed by the PBOC at 6.5616 earlier in the session, marginally below the 6.5630 level of Wednesday, the USD/CNY rose strongly in initial trades, hitting a high of 6.5904 before easing to currently trade at 6.5880.
The weakness in onshore traded yuan was replicated in offshore markets with USD/CNH hitting a session high of 6.6128. It currently trades at 6.6003. A higher figure indicates the yuan has weakened against the US dollar.