(Bloomberg) — China’s stocks rose in volatile trade as the government struggled to restore investor confidence in a market that’s lost $3.9 trillion in less than a month.
The Shanghai Composite Index gained 1.3 percent to 3,552.78 at the midday break after falling as much as 3.8 percent and gaining 2.6 percent. With at least 1,439 companies halted on mainland trading, sellers are locked out of 50 percent of the Chinese market. Regulators late Wednesday banned major stockholders from selling stakes in listed companies, while the Xinhua News Agency reported Thursday the public security ministry will look into “malicious” shorting of stocks.
Officials have unveiled market-boosting measures almost every night over the past 10 days to revive investor faith. Foreign traders sold Chinese shares at a record pace this week in the first three day this week in part due to concerns over the government’s meddling in markets, while traders liquidated a record amount of margin trades on Wednesday.
“Given the fact that lots of stocks are suspended from trading, selling pressure may still be there once they resume trading,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees about $3.3 billion. “We are cautious about saying the market has bottomed already.”
Traders unloaded a record 112.2 billion yuan ($18 billion) of shares purchased with borrowed money on the Shanghai exchange Wednesday, the 13th straight day of declines. A five-fold surge in margin debt over the 12 months through June 12 had helped propel the Shanghai index to a more than 150 percent gain.
While the median price-to-earnings ratio in China has dropped to 53 from 108 at the height of the rally, valuations are more than twice as high as those on the Standard & Poor’s 500 Index.
President Xi Jinping’s government is intensifying efforts to combat the market turmoil as policy makers seek to maintain confidence in the nation’s leadership and prevent a crash from weighing on the weakest economic expansion since 1990. China now has more than 90 million individual investors, outnumbering members of the Communist Party.
