China’s Stocks Rally on State Fund Support

Chinese stocks rallied, sending the benchmark index to its biggest gain in a week, amid speculation the government is boosting funds to support the world’s second-largest equity market.

The Shanghai Composite Index rose 3.5 percent to 3,957.35 at the close, erasing a weekly drop. The Shenzhen Composite Index climbed 5 percent, the most since 2012, as technology shares rallied. China Securities Finance Corp., a state-backed agency that provides margin finance and liquidity to the market, has 2.5 trillion yuan to 3 trillion yuan ($ 483 billion) on tap to support stocks, people familiar with the matter said.

Funding will be used to offer liquidity support to brokerages and to purchase stocks and mutual funds, the people said. Caijing earlier reported 17 banks granted a credit line of 2 trillion yuan to China Securities Finance. The latest measure comes after policy makers banned large shareholders from selling stakes, ordered state-run institutions to buy equities and suspended initial public offerings to halt a rout that erased almost $ 4 trillion.

The Shanghai Composite rebounded 9 percent from July 8 through July 16 after tumbling 32 percent in a month as investors unwound margin-debt positions. A total of 635 stocks were halted on mainland exchanges Friday, about 22 percent of all listings, down from more than 1,300 at the end of last week.

Source : Bloomberg

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China Stock-Index Futures Drop as IPO Fund Demand Drains Cash

China’s stock-index futures fell amid concern a flood of share sales may lure funds away from existing equities.

Futures on the CSI 300 Index expiring in June, the most active contract, slid 1.3 percent to 5,162.20 as of 9:20 a.m. local time.

The Shanghai Composite Index dropped 2 percent to 5,062.99 on Monday. The CSI 300 Index declined 2.1 percent. Subscriptions for 25 A-share initial public offerings including Guotai Junan Securities Co. may tie up 6.68 trillion yuan ($ 1.08 trillion) of liquidity starting Wednesday, according to the median estimate of six analysts surveyed by Bloomberg. Funds to be locked up may be the highest since January 2014 when China resumed IPO approvals, according to China International Capital Corp. and Guotai Junan.

Source : Bloomberg

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