Beijing, China (BBN) – Chinese shares continued to rally on Friday, gaining momentum from Thursday’s dramatic rebound as drastic government measures to support the volatile market started to have an impact.
The Shanghai Composite closed up 4.5 per cent at 3,877.80 after ending the previous session up nearly 6.0 per cent, reports BBC.
The government intervened after stocks had fallen by third since mid-June.
Hong Kong’s Hang Seng was closed up 2.08 per cent to 24,901.28.
Measures to stem the sell-off have included banning major investors from selling shares, and ordering others to buy, although there were a number of companies’ shares that could not be traded at all as they were suspended during the rout.
Other moves include a ban on short-selling, a suspension of initial public offerings along with injecting money into the market through margin lending.
These strong moves by the government to restore order in the market could backfire, according to Evan Lucas, market strategist at trading firm IG: “[Its] firm response to the past 18 days of turmoil does “create perceptions that further liberalisations and free market principles will be abandoned as Beijing grapples with additional regulations”.
“This will create longer-term issues,” he added, as analysts started to question what will happen to the market once those measures are removed.
The rest of Asia was also higher after Greece proposed new reforms in its bid to strike a deal with creditors in the debt crisis.
Greece’s new measures to boost revenue included getting rid of tax breaks for islands – paving the way for a cash-for-reform deal with creditors.
Japan’s Nikkei 225 index finished down 0.4 per cent to 19,779.83 – erasing earlier gains and ending with its biggest weekly fall since October – down 3.7 per cent.
The benchmark index was dragged down by Uniqlo owner Fast Retailing, whose stocks fell 6.0 per cent on its weak domestic sales outlook for the current quarter.
Australian shares, however, headed higher with mining stocks up on a jump in iron ore prices overnight.
The benchmark S&P/ASX 200 index ended up 0.4 per cent to 5,492.00.
The price of Australia’s biggest export, iron ore, rose about 10 per cent – but it still remains at half the level of a year ago.
Shares of heavyweight miners BHP Billiton and Rio Tinto were up 3.2 per cent and 2.4 per cent, respectively.
In South Korea, shares headed higher despite data showing that import prices fell for the 34th consecutive month in June, but the pace of declines eased.
The Bank of Korea said import prices in won terms fell 14 per cent in June from a year ago – marking the smallest drop since December.
The benchmark Kospi index closed up 0.2 per cent to 2,031.17 – posting its worst week in over two years by losing 3.5 per cent.