China’s Main Stock Index Recovers Two-Day Losses in One Hour

The Chinese stock market has rebounded after a two-day decline on September 16.

The Shanghai Composite Index which lost about 6.1 percent over the last two days jumped 5.9 percent in the last hour of trading, halting the loss.

At the close, the index lowered to 3,152 points, 4.89 percent higher than the previous day. The rally was the largest since early-September.

The SZSE Component Index also surged. It is an index of the 40 largest and most liquid Chinese stocks listed in the Shenzhen Stock Exchange. It finished 6.45 percent higher against an 11 percent decline over the last two days.

The ChiNext hi-tech index closed 7.16 percent higher (previously it dropped by nearly 13 percent).

According to market analysts, today’s rally was provoked by the strong US retail sales data and investors’ expectations for the US Federal Reserve raising interest rates. The Fed may announce a rate hike on September 17.

"If the Fed raises the rate this week, that would remove a lot of uncertainties from the market and give a strong signal that the US economy is ready to take the baton from China as the next engine of growth for the world," Jeffrosenberg Tan, a portfolio manager at PT Sinarmas Asset Management, told Bloomberg.

During the summer of 2015, the Shanghai Composite Index dropped by 39 percent against the June record high, including by 20 percent during the last two weeks of August. The Chinese government spent 1.5 trillion yuan ($236 billion) to shore up its stock market.

According to a report by Goldman Sachs analysts, the total sum of the government expenditures to support the market was equivalent in value to 9.2 percent of China’s freely-traded shares.

Amid the decline in the stock market, China devaluated its national currency by three percent. In order to prevent the yuan from further decline, the People’s Bank of China (PBC) had to sell dollars. According to a PBC report, in August China’s international reserves decreased by nearly $94 billion.