China stocks surge as state swiftly steps in to support market

The United States today had imposed a 25% hike in tariffs on China.

HONG KONG: China’s stocks rallied as Beijing took steps to stabilise the market after the US imposed additional tariffs on the nation’s goods. The yuan strengthened.

The Shanghai Composite Index closed 3.1% higher Friday, with banks and heavyweights Kweichow Moutai and Ping An Insurance contributing the most to gains.

That’s after a volatile afternoon session which briefly saw the index drop 0.4%.

State funds were seen buying stocks after the lunch break, just as markets reopened following the Trump administration’s latest hit on China’s exports.

“State-fund buying may be boosting financial stocks,” said Southeast Securities Beijing-based analyst Zhang Gang. “The brief slump at the reopen obviously reflected the latest tariff news.”

The late rebound comes after a bad few days for the nation’s financial markets. Even after Friday’s gains, the yuan is down about 1% this week while the Shanghai benchmark has lost 4.5%.

Daily average turnover on domestic exchanges has been dwindling for five consecutive weeks, the longest such streak since late 2017.

China immediately said in a statement it is forced to retaliate, but didn’t specify how, after the US hiked levies on more than US$200 billion in goods.

Negotiations between Xi Jinping’s top trade envoy and his US counterparts in Washington were due to resume on Friday morning Washington time.

President Donald Trump earlier insisted a deal was still possible to reach this week, even as he reiterated plans to raise the tariffs.

Chinese markets have shown unexpected resilience to bad news before, usually with the help of the state. In May 2017, traders speculated authorities helped engineer gains in stocks and the yuan after Moody’s Investors Service cut its rating on the nation’s debt.