Chinese stocks bounce back as authorities step up intervention

Stock markets in China bounced back today, led by a surge in resources shares, on hopes that regulators will extend a ban on share sales by major stakeholders to avoid a potential repeat of last summer's crash.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended the day up 1.8pc at 3,539.81, while the Shanghai Composite Index gained 2.3pc to 3,361.84 points.

State media reported that the ban on share sales, first introduced at the height of the country's market turmoil last summer and due to expire on Friday, will remain in place until new rules to manage the process are formally set out later in the year.

Stock markets this morning were also helped by statements from at least 30 companies saying their controlling shareholders or senior executives would not sell shares on the secondary market within the next six or 12 months.

Chinese authorities started escalating their market intervention on Tuesday in a bid to prop up stocks after $590bn was wiped off shares on Monday.

Beijing's state-owned financial institutions hoovered up shares and the People's Bank of China also pumped in 130bn yuan ($20bn) into the financial system, its largest single injection of liquidity since September, to quell investor fears after a tumultuous start to 2016 trading.

The measures came after Chinese stocks saw the worst ever start to the year, with shares in the blue-chip CSI300 falling by 7pc on Monday. This triggered an automatic "circuit breaker" mechanism, where trading was halted in a bid to dampen volatility.

Many traders largely attributed Monday's sell-off to fears that the expiry of the share-sale ban could see an estimated 1.24 trillion yuan ($190.23 billion) of shares dumped onto the market.

However, some traders say further restricting share sales was not justified, and would only prolong, rather than stop, market volatility.

"It's like the sword of the Damocles overshadowing the market," Shen Weizheng, fund manager at Shanghai-based Ivy Capital said, adding the real worry is that the Chinese economy will remain weak.

Activity in China's services sector expanded at its slowest rate in 17 months in December, a private survey showed on Wednesday, in a further indication that the world's second-largest economy may be losing steam.

On Chinese share markets, all sectors rebounded on Wednesday, with resources and energy surging more than 5pc.