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 The ban was set to expire at the beginning of next week, but after
markets crashed 7 percent on Monday, the China Securities Regulatory
Commission (CSRC) said it would implement a new policy to manage the
pace of stakeholder sales, without specifying when the new policy
would be ready.
The CSI300 index <.CSI300> rose 1.75 percent to 3539.81, while the
Shanghai Composite Index <.SSEC> gained 2.3 percent to 3,362.29
points.
China CSI300 stock index futures for January were up 2 percent at
3,465, still about 75 points below the underlying index, indicating
expectations of weakness to come.
Shen Weizheng, fund manager at Shanghai-based Ivy Capital, said
extending share sale restrictions would prolong market bearishness.
"It's like the sword of Damocles, always hanging over your head. The
best way is to remove restrictions altogether."
The indexes were up despite data released in the morning showing
that growth in China's services sector slowed to its weakest in 17
months in December, which came two days after figures showing
factory activity shrank for a 10th straight month.
The slowing economy contributed to weakness throughout 2015 in
China's currency, which was weaker again on Wednesday after the
People's Bank of China unexpectedly fixed the midpoint rate at
6.5314 per dollar prior to the market open, even weaker than the
previous day's closing quote 6.5157.
"The midpoint was a surprise. Still, it stayed in line with the
PBOC's tone of late to lead the yuan to edge down," said a dealer at
an Asian bank in Shanghai.
That triggered further selling in the offshore yuan, which slumped
to 6.7250 per dollar, its lowest since trading began in 2010 and a
record discount of about 2.5 percent to the onshore rate of 6.5526,
adding to a spread that is encouraging capital to flow out of the
country.
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The yuan's weakness, renewed Chinese stock market volatility and a
slowing economy have put China's policymaking at the forefront of
global market risks at the start of 2016, along with the pace of
expected U.S. interest rate rises.
Zhou Hao, Commerzbank's senior Emerging Markets Economist for Asia,
said the sudden movement in the fixing rate would create more market
volatility and suggested Chinese authorities were willing to
tolerate more weakness in the currency for the time being.
China's trade partners - and regional competitors for offshore
export markets - will be wary of the economic impact of a sliding
yuan.
China's struggling exporters might benefit from a softer currency,
but it would also increase the cost of servicing offshore debt
incurred by Chinese companies and make overseas investments more
expensive for domestic firms. It would also further damage corporate
interest in using the yuan for trade and investment - another policy
goal.
(Reporting by Pete Sweeney, Samuel Shen and the Shanghai Newsroom;
Editing by Will Waterman)
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