Markets rebound as rescue measures kick in

Mainland stock markets rebounded on Wednesday, largely as a result of government support measures such as cracking down on malicious trading activities, experts said Wednesday. The benchmark Shanghai Composite Index rose by 3.44 percent or 126.17 points to close at 3,789.17 points on Wednesday, following a steep decline of 8.48 percent on Monday and a slightly milder 1.68 percent drop on Tuesday. The Shenzhen Component Index climbed 4.11 percent or 506.30 points to close at 12,823 points on Wednesday, after dropping 7.59 percent and 1.41 percent on Monday and Tuesday, respectively. More than 400 stocks on the two bourses climbed by their daily trading limit of 10 percent, with the tourism, aviation and agriculture sectors seeing strong performance. Yu Fenghui, a financial commentator, told the Global Times on Wednesday that the rebound was a direct result of the government's intervention following a dramatic plunge in the market on Monday. According to a post on the official Weibo account of the China Securities Regulatory Commission (CSRC) on Tuesday, the CSRC is investigating short-selling activities that may have contributed to the market slide on Monday. Aviation Industry Corporation of China (AICC) published an announcement on its official website on Wednesday, saying that two of its subordinate listed companies, Zhonghang Heibao Co and AVIC Capital Co, had received a notice from the CSRC saying that they would be investigated for possible involvement in illegal stock trading activities. AICC said in the announcement that it would firmly support and cooperate with the CSRC. The company also noted that it had taken steps to launch self inspections, and would deal with any irregularities in accordance with the law. AVIC Capital also announced on Wednesday that the company's board of directors had decided to remove Yang Shengjun from the position of general manager. According to a report by People's Daily on Wednesday, companies are usually investigated for improper activities such as illegal release of information. Apart from investigations into abnormal trading activities, the authorities have also launched a batch of rescue measures in recent weeks to curb the downward trend in the markets that began in mid-June. The measures included suspension of approvals for new IPOs and requiring State-owned banks not to sell shares in their listed units. The CSRC also released a message on Monday, saying that it would not stop its efforts to stabilize the markets. Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Wednesday that the government's urgent measures to save the stock markets were "necessary." "It helps to eliminate public panic and restore investors' confidence in domestic stock markets," Li said. Yu, however, cautioned that domestic stock markets should not be entirely reliant upon government rescue measures. "The government should see to it that they don't disrupt the rules of mainland stock markets during the process of cracking down upon certain malicious operations," Yu said. Yu also said that he was not sure the government's rescue measures would help domestic stock markets to recover completely. "The markets are still in an uncertain state," Yu said, adding that big fluctuations could take place again.