Chinese stocks rebounded from the brink of a bear market in a late day swing as the lowest valuations in four months lured bargain hunters and a group of smaller companies pledged to support their share prices.
The Shanghai Composite Index gained 2 per cent to 3,007.65 at the close, reversing a loss of as much as 2.8 per cent and sending a gauge of volatility to the highest levels since September.
The ChiNext small-caps index surged the most in two months after 28 listed companies vowed to take action to stabilise the market, with some pledging not to sell shares over the next six months.
State funds may have entered to buy stocks after the Shanghai index fell below the lowest levels reached in last year’s rout, according to Galaxy Securities.
"On one hand, there's need for a technical rebound given the steep losses, on the other the rebound also reflects related authorities' market-preserving efforts with many small and medium companies saying holders pledge not to cut holdings," Sun Jianbo, a Beijing-based strategist at Galaxy Securities, said.
“There might also be some buying by state funds, which might have propped up stocks.”
The Shanghai gauge earlier dropped below the low of 2,927.29 set in August when a summer rout wiped out $5 trillion and spurred the government to impose emergency rescue measures.
The index, the worst performer among 93 global benchmark measures tracked by Bloomberg this year, fell as much as 20 per cent from the December high before paring losses.
- Bloomberg
