Chinese stocks staged a ridiculous turnaround in late trade to finish higher

Photo by Luis Davilla/Cover/Getty Images

Wild. Rumour-filled. Chaotic. They’re just some of the words that come to mind looking at the Chinese stock-market action today.

The result was, it finished a bit higher, but it didn’t look like that was going to be the case earlier in the session.

The benchmark Shanghai Composite, having been down by more than 5% in early trade – something that took its losses to more than 11% from Monday’s close – finished the session up by an impressive 1.24%.

That’s quite a turnaround, even by Composite’s usual standards.

The daily range was a near-unbelievable 6.75%.

All sectors bar financials and energy finished with strong gains with telecommunications, up a whopping 9.63%, leading the pack higher.

Only yesterday it had fallen by a similar amount.

Elsewhere materials and healthcare finished with gains of more than 2%.

Having been outperformed by their larger peers earlier in the session, small-cap stocks roared higher in afternoon trade with the CSI 500, Shenzhen Composite and tech-heavy ChiNext indices all finishing with gains in excess of 2%.

While they finished still finished higher, large-cap stocks were the session laggards.

The SSE 50 and CSI 300 indices finished with gains of 0.90% and 1.59% respectively.

So what was the catalyst behind the huge late-session gains?

Apart from the likelihood of government-backed buyers being involved, there were also unsubstantiated reports that China’s central bank, the PBoC may cut the reserve ratio requirement for Chinese banks by 50bps this weekend.

Whether or not that will eventuate remains uncertain, but it is amazing how rumours such as these always seem to appear when Chinese stocks are in the midst of a sharp selloff.

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