Liu Shiyu, the newly installed chairman of the China Securities Regulatory Commission, gave Chinese stocks a boost Monday when he indicated the state would continue to prop up the market.
The top Chinese regulator told reporters "it's too early to talk about" the exit of government bailout funds, and that China's shift toward a registration system for initial public offerings would "take a relatively long time," Reuters reported. Investors had feared that IPO reform would flood the market with new shares, and that the departure of state-backed investors would ramp up selling pressure.
“Liu’s vow to help with the market’s recovery brought back some investor confidence,” Castor Pang, the head of research at Core-Pacific Yamaichi Hong Kong, told Bloomberg.
Chinese stocks were also spurred by a $9.3 billion deal between subway operator Shenzhen Metro group and real estate company China Vanke Co.
The Shanghai Composite Index rose 1.8 percent Monday and Hong Kong's Hang Seng Index gained 1.2 percent, while an index of smaller companies, ChiNext, jumped 4.6 percent. Overall, stocks saw some of their greatest gains in more than a week. Chinese markets have experienced months of turmoil since August, when China's central bank devalued the currency in a move that triggered an 8.5 percent drop in the Shanghai Composite Index in a single day, all within part of a broader economic shift in China, whose slowing industrial activity has rippled throughout the global economy.
Liu said that if needed, he would act “decisively” to stave off market panic and that it was too soon for a Chinese rescue fund, which toward the end of last summer bought hundreds of different stocks in a major effort to shore up share prices, to exit the market. From June to September of last year, China Securities Finance Corp. went from owning two stocks to owning 742. By the end of November, government rescue funds owned at least 6 percent of the mainland stock market.
Company shares rose Monday with the news of several major deals. Not only did shares of China Vanke Co. rise 10 percent after it signed a memorandum of understanding with Shenzhen Metro Group for the transit company to become a major investor in the real estate group, but shares of China Overseas Land rose 1.36 percent after it said it would spend 31 billion yuan, or $4.77 billion, on residential assets from Citic.
Recent economic indicators continue to fall short of projections in China. Retail sales in January and February grew 10.2 percent over the previous year, versus the 11 percent predicted, while aggregate financing, forecast at 1.84 billion by Bloomberg, was at 780.2 million in February, according to the People's Bank of China.