Chinese stocks rally again in the final hour of trade

For the second consecutive day Chinese stocks have surged higher in the final hour of trade.

Having been up 1.87% at the mid-session break, the benchmark Shanghai Composite rattled home in late trade, closing the session at 3232.35, an increase of 4.82%.

The late gain was eerily similar to that seen on Thursday where the index staged an amazing 6.11% turnaround in the final 46 minutes of trade, eventually closing the session up more than 5%.

Despite the enormous rally, the index still closed the week down 7.9%.

It has been a wild ride.

Like yesterday, all sectors finished in the black with telecommunications, the worst performing sector earlier in the week, leading the charge higher with a gain of 7.6%.

Elsewhere industrials, IT, materials, consumer cyclicals and utilities all closed with gains in excess of 5%.

As opposed to previous sessions where large-cap stocks outperformed their smaller peers, the opposite occurred on Friday.

The CSI 500, Shenzhen Composite and tech-heavy ChiNext indices, brimming with small-cap stocks, rose by more than 5%. Elsewhere the SSE 50 and CSI 300, containing larger firms, jumped 3.26% and 4.26% respectively.

While the government, through its intermediaries, was likely instrumental in orchestrating today’s rally, there were a number of other factors that helped underpin sentiment towards stocks.

Early in the session there were rumours circulating that the China Securities Financing Corporation, the agency responsible for arranging margin financing to purchase Chinese stocks, were looking to raise 1.4 trillion yuan in funding in order to facilitate yet another stock market rescue.

It was also reported that Chinese pension funds were looking to purchase up to 600 billion yuan worth of stocks “as soon as possible”.

The continued gains in stocks comes despite earlier news that Chinese industrial profits slipped 2.9% in the year to July, a steeper contraction than the 0.3% decline reported in June.

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