Chinese Stocks Rebound With Yuan as State Media Appeal for Calm

(Bloomberg) -- Chinese stocks rose, reversing Wednesday’s slump, as state media sought to downplay recent market turbulence and the central bank set a stronger daily currency fixing than traders had expected.

The Shanghai Composite Index climbed 2.2 percent at the close, notching up its second 2 percent plus move this week. Xinhua News Agency said moves in financial markets were within a controllable range and valuations for some industries had fallen to lows. The yuan strengthened as much as 0.8 percent in Hong Kong, after tumbling 1.1 percent late Wednesday in its biggest loss since January 2016.

Signs of a bottom are emerging in China’s battered stock market. After sinking more than 20 percent from this year’s high amid concern its economy will struggle to cope with both deleveraging and a trade war, the Shanghai gauge is now heading for its first weekly advance since May. Some foreign funds have been buying, pointing to historically cheap valuations.

"The bulls are getting stronger," said Kang Chongli, Beijing-based strategist with Lianxun Securities Co. "In the past few times the market closed up, the increases were mostly driven by either small caps or blue chips, rarely both, and now we’re also finally seeing an end to this see-saw effect."

The offshore yuan traded at 6.6672 per dollar at 5:20 p.m. local time after falling to 6.7249 overnight. The People’s Bank of China set the daily reference rate at 6.6726, stronger than estimates compiled by Bloomberg. The onshore currency climbed 0.1 percent.

Technology stocks paced gains after ZTE Corp. signed a deal with the U.S. to resume doing business with American suppliers. Hong Kong shares were also higher, with the Hang Seng Index advancing 0.6 percent, led by Sunny Optical Technology Group Co. and Geely Automobile Holdings Ltd.

"The Xinhua commentary is boosting sentiment, as it fuels hope that the government may step in to support the stock and foreign exchange market if necessary," said Steven Leung, Uob Kay Hian (Hong Kong) Ltd. executive director. "All the bad news has been priced in in the near term."

Shares of Brilliance China Automotive Holdings Ltd. slumped the most in almost a decade after a German media report said partner BMW AG is set to increase its stake in the companies’ China joint venture to at least 75 percent. Shares of BAIC Motor Corp., a partner of Daimler AG, declined 6 percent.

--With assistance from Sofia Horta e Costa.

To contact Bloomberg News staff for this story: Jeanny Yu in Hong Kong at jyu107@bloomberg.net;April Ma in Beijing at ama112@bloomberg.net

To contact the editor responsible for this story: Richard Frost at rfrost4@bloomberg.net

©2018 Bloomberg L.P.

With assistance from Editorial Board