China stock traders count on Beijing boost in the afternoon

September 01, 2015 15:29
Even as retail investors in China sell off their heavily leveraged holdings of stocks, the 'national team' of state-backed funds can be relied on to ride to the rescue of the market before it closes. Photo:

Afternoons in the Chinese stock market have turned into a waiting game as state-backed funds arrive like clockwork.

Over each of the past four trading days, the Shanghai Stock Exchange 50 Index of some of the country's largest firms has rebounded an average 6.4 percent in late trading from session lows, Bloomberg reported Tuesday.

The gauge has surged 15 percent over the four-day period, its biggest rally since 2008 and twice the 8.1 percent gain by the Shanghai Composite Index.

The large-cap gauge was 0.9 percent higher at 2:47 p.m. Tuesday after falling as much as 4.8 percent earlier.

The rallies are driven by government-backed funds buying shares to stabilize the market before a World War II victory parade on Thursday, IG Asia Pte. Ltd. was quoted as saying.

Margin traders cut leveraged bets by a net US$10 billion during the period to the lowest level since Dec. 25, suggesting sustained selling pressure among China’s 90 million individual investors.

“When you see a straight-line buying pattern in the last 45 minutes, that’s usually the 'national team' supporting the market,” Michelle Leung, chief executive officer of Xingtai Capital Management Ltd. in Hong Kong, was quoted as saying.

"When you track market opens or you track outstanding margin balance, we could see the bulk of retail investors selling."

The government revived its intervention in equities on Thursday to halt the biggest selloff since 1996.

The effort to support markets was part of a broader push to ensure nothing detracts from the parade, which the government will use to demonstrate its rising military and political might.

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