China Said to Intervene in Stock Market as Xi Attends Davos
China is taking steps to support its stock market this week, according to people familiar with the matter, as President Xi Jinping’s appearance at the World Economic Forum in Davos puts Asia’s largest economy in the global spotlight.
State-owned investors bought shares to steady the market on Monday, while some funds were guided on Tuesday not to sell holdings with big weightings in benchmark indexes, the people said, asking not to be identified because they aren’t authorized to discuss the matter publicly. China’s securities regulators asked funds and brokerages to trade prudently this week and directed exchanges to report any abnormal transactions, the people said.
The CSI 300 Index of shares in Shanghai and Shenzhen climbed 0.2 percent on Tuesday, after earlier losing as much as 0.8 percent. On Monday, the index recovered from an intraday drop of 1.7 percent to close little changed, with some traders speculating the afternoon rally was caused by state buying.
“China is doing this probably because it wants to paint an image of positivity as President Xi attends Davos,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. Stocks will continue to be volatile as the nation’s monetary conditions tighten, Xie said.
China’s shares have been under pressure since the start of December, along with the nation’s bonds, as funding costs rise amid central bank efforts to stave off asset bubbles and support the currency. A gauge of small-cap shares in Shenzhen tumbled 8.1 percent in an eight-day rout through Monday before rallying in late trade Tuesday.
Chinese authorities have been known to intervene in markets before events of political importance, with government funds stepping in to boost share prices before a key meeting of the National People’s Congress last year and before a 2015 military parade celebrating the 70th anniversary of the World War II victory over Japan.
The China Securities Regulatory Commission didn’t immediately respond to a faxed request for comment and two calls to the press office weren’t answered. The Shenzhen Stock Exchange and the Shanghai Stock Exchange declined to comment.
Xi’s presence at Davos marks a chance to burnish China’s clout after decades of American economic and military dominance. Facing a more protectionist, inward-looking Donald Trump administration and a disruptive British exit from the European Union, Xi has been offering assurances that the world’s largest trading nation will defend the structures that have fostered globalization and economic growth.
“Protectionism is like locking yourself in a dark room, which would seem to escape wind and rain, but also block out the sunshine,” Xi told the World Economic Forum, the first Chinese head of state to address the annual gathering in the Alpine resort town of Davos. “No one is a winner in a trade war.”
The president brings with him the biggest-ever delegation of Chinese executives to Davos, including Alibaba Group Holding Ltd. founder Jack Ma, Dalian Wanda Group Co. Chairman Wang Jianlin and Huawei Technologies Co. Chairwoman Sun Yafang.
— With assistance by Tian Chen, and Steven Yang