SHANGHAI (BLOOMBERG) - Chinese stocks rose a third day, sending the Shanghai Composite Index past the 4,000 level, as technology shares rallied and more companies resumed trading after being halted during a recent rout.
The Shanghai Composite gained 1.1 per cent to 4,001.05 at 10:18 a.m., heading for the first close above that level since July 1. The ChiNext index of small-company shares jumped 3.8 per cent.
A total of 633 companies were suspended from trading just after the open on mainland exchanges Monday, or 22 per cent of total listings, down from 635 at the close Friday.
Volatility is increasing as companies start trading again and the government boosts measures to support the stock market after an almost US$4 trillion rout. China Securities Finance Corp. can access as much as 3 trillion yuan (S$662 billion) of borrowed funds from sources including the central bank and commercial lenders, people familiar with the matter said Friday.
"Investors are piling into small caps as they have higher beta and are likely to do better amid the rebound," said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees about US$3.3 billion. "It looks like the rebound has legs as confidence has partially recovered."
The Shanghai Composite posted a 2.1 per cent gain last week. The benchmark gauge has rebounded 13 per cent from July 8 through July 17 after tumbling 32 per cent in a month as investors unwound margin-debt positions. Margin traders increased holdings of shares purchased with borrowed money for the first time in three days on Friday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising by 0.3 per cent to 921.3 billion yuan.
Over the weekend, China tightened control of online financing, saying it is looking to develop healthy industry growth amid criticism the platforms contributed to an equities plunge. All client funds must be parked at established banks and Internet finance firms will need approval from financial as well as cyberspace regulators, the People's Bank of China said in a statement on its website on Saturday.
The nation's online lenders helped fuel an equity roller- coaster that saw the benchmark index rallying more than 150 per cent in the 12 months through June 12 before abruptly crashing. The sites offered 3.1 billion yuan of new loans for stock investment in May, about six times that of January, according to the Yingcan Group, which tracks the nation's more than 2,000 peer-to-peer finance platforms.
The government has achieved its goal of ceasing panic and stabilizing the market by taking timely measures, the Securities Daily reported Monday, citing Vice Finance Minister Zhu Guangyao. It is appropriate for China to take stabilizing measures when market volatility rises to a high level, Zhu was cited as saying.