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Chinese Markets Open Higher After Previous Day’s Suspension Chinese Markets Rise After Volatile Opening
(35 minutes later)
HONG KONG — Chinese markets opened higher on Friday after the Chinese stock market regulator overnight suspended several measures intended to short-circuit steep declines. HONG KONG — With Beijing’s grip slightly looser, Chinese markets steadied on Friday.
Despite the positive opening, shares were volatile for the first hour of trading, with a quick sell-off within 30 minutes followed by another rise by midmorning. The CSI 300 blue-chip index was up about 1.7 percent, while the Shanghai Composite Index was up about 1.3 percent. The Shenzhen Composite Index was up about 0.3 percent but at one point had been down 4 percent. “Circuit breakers” that had been supposed to keep markets from dropping disastrously over the course of a day had been removed the previous night.
On Friday morning, the country’s central bank slightly raised the trading range for the renminbi and strengthened the currency, the depreciation of which in the preceding three weeks had stoked concerns among investors. It was set at 6.5636 renminbi to the dollar, compared with 6.5646 on Thursday. It remains near its weakest point since early 2011. The measures, established Monday, had been tripped twice in the past week and had halted trading, yet had seemed to spook investors into broader sell-offs when activity resumed.
The stock market regulator had announced on Thursday night that it would suspend a “circuit breaker” feature that had brought an early end to the trading day twice in the past week. The regulator also said it would extend a ban on selling large chunks of some stocks for another three months. On Friday, shares in both Shanghai and Shenzhen rose despite a shaky opening hour, with sharp drops and rises within minutes of each other.
The plunge on Thursday that brought trading to an end after less than half an hour had sent ripples through global markets. The S&P 500 ended the day on Thursday down 2.37 percent, while the Euro Stoxx 50 finished the day 1.74 percent lower. Markets seemed “a little more normal,” said Thomas Gatley, a corporate analyst at Gavekal Dragonomics, a financial research company.
Markets were also mixed in the rest of Asia. Japan’s Nikkei 225 opened lower on Friday but pared losses and was up 0.3 percent by midmorning. The S&P/ASX 200 in Australia was down 0.5 percent, while Hong Kong’s Hang Seng Index was up 1 percent. “We think that is in part a bunch of mutual funds who couldn’t liquidate the previous day,” Mr. Gatley said of the seesawing seen early in the morning.
The tripping of the circuit breaker on Thursday meant that trading lasted less than half an hour that day.
“The removal of the circuit breaker has removed that magnet effect that when things were down 3 percent, there was the other risk that everyone got stuck,” he added.
The China Securities Regulatory Commission also extended a ban on sales by major shareholders, which had been set to expire on Friday. Some feared the sell-off was in part prompted when those with smaller holdings sold off before the bigger shareholders did.
Stocks opened higher on Friday morning, but in the early volatility, a quick sell-off within 30 minutes was followed by another rise by midmorning. Shares continued to rise after lunch, and by the close of day, the CSI 300 blue-chip index was up about 2 percent. The Shanghai Composite index finished the day nearly 2 percent higher, while the Shenzhen Composite index, which had been down as much as 4 percent, ended the day 1.2 percent higher.
Hao Hong, the chief market strategist at Bank of Communications International, noted that funds had been forced to sell at the open as investors pulled out their money. He added that it also seemed likely that the so-called “national team” of state-influenced brokerage firms had been pushed to shore up the markets.
On Friday morning, the country’s central bank slightly raised the trading range for the renminbi and strengthened the currency, whose depreciation in the preceding three weeks had stoked concerns among investors. It was set at 6.5636 renminbi to the dollar, compared with 6.5646 on Thursday. It remains near its weakest point since early 2011.
“It certainly helped to stabilize sentiment today. There were major concerns that China would continue to weaken the fixings,” said Mitul Kotecha, head of Asia foreign exchange and rates strategy for Barclays.
The Chinese government has been allowing the value of the renminbi to decline steadily, which could bolster exports and growth. But the movement has also unsettled investors and pushed money out of the country.
Although the shift on Friday was slight, it still provided a sense of respite, Mr. Kotecha said.
“When you have several days of weaker fixings, markets are fearing the worst,” he said. “To have a break is a calming factor.”
The aftershocks of Thursday’s plunge rippled through global market. The S.&P. 500 ended the day on Thursday down 2.3 percent, while the Euro Stoxx 50 finished the day 1.7 percent lower.
The Euro Stoxx 50 opened Friday with a slight rise of 0.1 percent.
Markets were mixed in Asia. Japan’s Nikkei 225 finished down almost 0.4 percent. The S&P/ASX 200 in Australia closed down nearly 0.4 percent after spending most of the day down, while Hong Kong’s Hang Seng index ended up 0.6 percent.
Although the Chinese markets looked a little more stable on Friday, Mr. Gatley said he expected more volatility, noting that valuations are pretty high.
“The other thing you can’t write out is more policy missteps from C.S.R.C. and more anticorruption probes, which are profoundly destabilizing,” he added, referring to the China Securities Regulatory Commission.
Mr. Hong at the Bank of Communications was similarly apprehensive.
“We have a small reprieve,” he said. “I wouldn’t be jumping for joy. The fundamentals are still weak. Valuations are still high.”
“The stock market is starting to reflect what is really going on in the economy,” he added.