Chinese stocks staged a sharp rebound on Friday afternoon, with investors speculating that authorities stepped in to stem the market’s slide. The CSI 300 Index closed up 0.2% after dropping as much as 1.6% earlier, while the tech-heavy Star 50 Index erased a drop of nearly 5%. Trading activity in eight exchange-traded funds commonly linked to the so-called National Team surged to almost 30 billion yuan ($4.5 billion), the highest level in nearly two months. The catalyst for the sudden turnaround was unclear, though traders pointed to screenshots circulating online that cited unverified regulatory guidance aimed at limiting selling. Others pointed to buying activity by the so-called National Team.
Chinese equities had been battered after mainland markets reopened on Thursday following a week-long holiday, dragged by lackluster spending and growing doubts over the artificial intelligence trade. “There’s market chatter claiming regulator have issued window guidance to funds and insurers to limit sell orders, although I haven’t heard any confirmation from companies yet,” said Fu Zhifeng, chief investment officer at Shanghai Chengzhou Investment Management. Investors confidence has been waning as a series of targeted measures released late September fell short of the bazooka-type stimulus Beijing had deployed during past episodes of market weakness. The CSI 300 Index is hovering near a one-year low, while the Star 50 gauge is close to erasing this year’s gains, which at one point reached 64%.
Optical and chip stocks, which rallied earlier this year as Beijing’s policy push for AI supremacy supported share prices, were among the hardest hit after the holiday as investors grew more selective over earnings and valuation concerns. Some market participants said bargain buyers likely emerged after steep losses. Recent Golden Week data have also shown signs of improvement from early indicators, with data tracking 25 major cities showing new home sales rising. For Hao Hong, chief investment officer at Lotus Asset Management in Hong Kong, the national team was likely active after the Shanghai Composite index fell below a key technical level. “3800 is still seen as a line in the sand to defend,” he said. “In the past year, the Shanghai Composite rebounded every time it fell towards this level. For a trader, this is a defendable bottom in the near term.”
Source: Bloomberg Markets · Summarized by HeadlinesBriefing