After looking like they were going to make it six losses from six sessions, Chinese stocks staged a ridiculously large rally in the final 45 minutes of trade, closing Thursday’s session with mammoth 5% plus gains.
The benchmark Shanghai Composite index, having traded higher for most of the session, looked like it was going to fall yet again into the close, slipping into negative territory with less than an hour to trade.
Then, just when it looked like all hope was lost, it began to surge higher, then higher, and then higher again.
In the space of just 46 minutes, the index staged a turnaround of 6.11%, eventually closing the session up an enormous 5.39%.
It was ridiculous, and reeked of government intervention.
Whatever the reason, it was the largest one-day percentage increase since July 9 this year, and trimmed the index’s weekly loss to only 12.04%.
Yes, it’s been that kind of week.
Unsurprisingly, all sectors finished in the black with financials, up 6.16%, leading the charge higher.
Given chatter yesterday that government-backed bodies – China’s so-called “national team” – were buying heavily in state-owned banks, this fits with the theory that the government were likely responsible for the breakneck late rally.
As was the case on Wednesday, large-cap stock indices outperformed their smaller peers.
The SSE 50, comprising large-cap stocks listed in Shanghai, surged by 7.87% while the CSI 300 added an equally-impressive 5.95%.
While they lagged behind their larger compatriots, the CSI 500, Shenzhen Composite and ChiNext indices – brimming with small-cap stocks – all rose by more than 3%.
So the five-day, 20% plus losing streak for stocks has come to a spectacular end.
However, with the benchmark Shanghai composite index still down 40.42% from its June 12 peak, it’s unlikely to convince many that the rout in stocks is over yet.
One day does not make a trend, and there’s little doubt that extreme oversold conditions, coupled with likely government intervention, played a significant role in the late rally today.
It will be interesting for many observers to see whether the extreme gains can be sustained tomorrow.