Business

Chinese shares up 4.5% as momentum spreads

Shanghai shares Image copyright AFP
Image caption Chinese shares have gained over 10% in the past two days

Chinese shares continued to rally on Friday, gaining momentum from Thursday's dramatic rebound as drastic government measures to support the volatile market started to have an impact.

The Shanghai Composite closed up 4.5% at 3,877.80 after ending the previous session up nearly 6%.

The government intervened after stocks had fallen by third since mid-June.

Hong Kong's Hang Seng was closed up 2.08% to 24,901.28.

Measures to stem the sell-off have included banning major investors from selling shares, and ordering others to buy, although there were a number of companies' shares that could not be traded at all as they were suspended during the rout.

Other moves include a ban on short-selling, a suspension of initial public offerings along with injecting money into the market through margin lending.

'Backfire'

These strong moves by the government to restore order in the market could backfire, according to Evan Lucas, market strategist at trading firm IG: "[Its] firm response to the past 18 days of turmoil does "create perceptions that further liberalisations and free market principles will be abandoned as Beijing grapples with additional regulations".

"This will create longer-term issues," he added, as analysts started to question what will happen to the market once those measures are removed.

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Media captionChina's stock crash - in 60 seconds

Greece's proposal

The rest of Asia was also higher after Greece proposed new reforms in its bid to strike a deal with creditors in the debt crisis.

Greece's new measures to boost revenue included getting rid of tax breaks for islands - paving the way for a cash-for-reform deal with creditors.

Japan's Nikkei 225 index finished down 0.4% to 19,779.83 - erasing earlier gains and ending with its biggest weekly fall since October - down 3.7%.

The benchmark index was dragged down by Uniqlo owner Fast Retailing, whose stocks fell 6% on its weak domestic sales outlook for the current quarter.

Rises

Australian shares, however, headed higher with mining stocks up on a jump in iron ore prices overnight.

The benchmark S&P/ASX 200 index ended up 0.4% to 5,492.00.

The price of Australia's biggest export, iron ore, rose about 10% - but it still remains at half the level of a year ago.

Shares of heavyweight miners BHP Billiton and Rio Tinto were up 3.2% and 2.4%, respectively.

In South Korea, shares headed higher despite data showing that import prices fell for the 34th consecutive month in June, but the pace of declines eased.

The Bank of Korea said import prices in won terms fell 14% in June from a year ago - marking the smallest drop since December.

The benchmark Kospi index closed up 0.2% to 2,031.17 - posting its worst week in over two years by losing 3.5%.

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