Chinese stocks are roaring higher on chatter fund managers are being asked to support the market

Guang Niu GettyImages

After falling heavily again this morning, Chinese stocks went on a tear late in trade after more news that China’s asset managers were going to ride to the rescue and start buying stocks.

Before the start of the session it was reported Chinese policymakers “will allow its basic endowment pension fund to invest in stock markets.”

This is a huge move because it’s the first time that these local government pension funds are allowed to invest in the stock market. Reuters reported that draft rules would allow funds to “invest up to 30 percent of their net assets in China’s stocks, equity funds and balanced funds.”

That’s approximately $100 billion that will be freed to purchase stocks.

As if that wasn’t enough fuel for a rally, this the post-lunch rampaging bull market came on chatter that the non-government backed funds would be joining the stock buying party.

Twitter – Screenshot

That news, that the Asset Management Association was urging funds to support the market, has had a big impact on prices driving the Shanghai Composite to close at 4,277.22, up 5.5% for the day and a long way from the low of 3,848 early in trade.

There is nothing like fresh cash and news of fresh buying to turn a market around after a big fall. The Communist leadership looks set to try to stabilise the market by all means possible.

The technicals suggest it has waited for exactly the right time to unleash this wave of cash.

If the market can hold above the support zone that worked on the daily charts yesterday, and is so far working today, then all the Shanghai composite needs is one more day of positive price action and the bulls just might be back.

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