<div>Chinese stocks rose on Monday after Beijing unleashed an unprecedented series of support measures over the weekend to stave off the prospect of a full-blown crash that was threatening to destabilise the world's second-biggest economy.</div><div> </div><div>In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China's state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.</div><div> </div><div>The CSI300 index of the largest listed companies in Shanghai and Shenzhen was up 2.5 percent, while the Shanghai Composite Index had gained 2.2 percent, pulling back after an initial burst of euphoria sent them up around 8 percent when trading began.</div><div> </div><div>Oliver Barron, China policy research analyst at NSBO, said it wasn't just faith in the markets at stake after investors had ignored official measures to prop up the market as equity indexes slid around 12 percent last week.</div><div> </div><div>"After the market continued to fall despite myriad support measures, the government reached peak panic mode and must have worried that investors would not only lose confidence in the markets, but in the government itself," he said.</div><div> </div><div>The rapid decline of China's previously booming stock market, which by the end of last week had fallen around 30 percent from a mid-June peak, had become a major headache for President Xi Jinping and China's top leaders, who were already struggling to avert a sharper economic slowdown.</div><div> </div><div>In response, China has orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.</div><div> </div><div><strong>Rinbows Follow Rain?</strong></div><div>China Vanke Co Ltd, the country's largest developer, said in a statement to the Hong Kong Stock Exchange on Monday it planned to repurchase up to 10 billion yuan ($1.6 billion) worth of its domestic shares to protect investor interests.</div><div> </div><div>China's state media rolled in behind the official moves with supportive reports and commentaries.</div><div> </div><div>"Rainbows always appear after rains," said an editorial by the People's Daily, the mouthpiece of the ruling Communist Party on Monday. "(China has) the conditions, ability and confidence in maintaining capital market stability," the newspaper said.</div><div> </div><div>Monday's gains were focused on blue chips, the explicit target of the stabilisation fund, with the ChiNext growth board, home to some of China's giddiest small-cap valuations, falling 3.8 percent.</div><div> </div><div>"Whether the blue chips will calm the small caps, or the small caps will continue to unsettle the rest of the market remains to be seen," wrote Hong Hao, chief strategist of BOCOM International.</div><div> </div><div>China stocks had more than doubled over the past year, despite a cooling economy and weakening corporate earnings, resulting in a market that even China's bullish securities regulators eventually admitted had become too frothy.</div><div> </div><div>But the slide that began in mid-June, and which the China Securities Regulatory Commission initially tried to downplay as a "healthy" correction, quickly showed signs of getting out of hand.</div><div> </div><div>A surprise interest-rate cut by the central bank at the end of June, relaxations in margin trading and other "stability measures" did little to calm investors, many of whom have borrowed heavily to play the stock market.</div><div> </div><div><strong>Still Expensive</strong></div><div>In a series of initial announcements on Saturday, China's top brokerages pledged to collectively buy at least 120 billion yuan ($19.3 billion) of shares to help steady the market, and said they would not sell while the Shanghai Composite Index remained below 4,500, a level last seen on June 25.</div><div> </div><div>The China Mutual Fund Association said 25 fund companies also pledged on Saturday to buy shares. Another 69 fund firms said on Sunday they would do the same.</div><div> </div><div>In addition, 28 companies that had been approved to launch IPOs announced they had suspended their plans.</div><div> </div><div>The U-turn is consistent with past IPO freezes in China when share markets were falling sharply, though they are usually spun as spontaneous company decisions, not as government directives.</div><div> </div><div>On Sunday, China state-owned investment company Central Huijin said it had recently been buying exchange-traded funds and would keep doing so.</div><div> </div><div>The aim was to signal to China's army of retail investors, who conduct around 85 percent of share transactions, that the government is standing behind the market.</div><div> </div><div>Analysts cautioned, however, that the latest policy moves may only bring short-term relief.</div><div> </div><div>"The government measures are only aimed at stabilising the market, and providing an exit for those who want to get out," said Liu Li, analyst at Shanxi Securities Co.</div><div> </div><div>"Theoretically, the central bank's money is unlimited, but you cannot expect the government to use public money to buy shares which are still expensive, such as ChiNext shares."</div><div> </div><div>(Reuters)</div>
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