SHANGHAI: China stocks reversed earlier losses to end higher on Friday, with gains aided by a surge in trading of exchange-traded funds favoured by state-backed investors, though blue-chip shares still notched a record-long weekly losing streak.
At the close, the benchmark Shanghai composite index rose 0.9 percent, while the blue-chip CSI300 index bounced 1.7 percent after losing as much as 1.9 percent earlier in the session.
However, the CSI300 index shed 1.6 percent for the week to record its 11th consecutive weekly drop, the longest losing streak on record since the index was created in 2005.
Following the rebound on Friday, the CSI300 was still down roughly 19 percent from its June 22 closing peak, nearing the 20 percent threshold widely used to confirm a technical bear market.
The smaller Shenzhen index rose 2.5 percent, the startup board ChiNext Composite index jumped 4.2 percent and Shanghai’s tech-focused STAR50 index gained 3 percent.
The sharp turnaround in Friday’s session came after a spike in trading volumes in several exchange-traded funds popular with the “National Team” of state-backed investors, fuelling speculation of official support for the market.
Separately, Chinese optical networking companies — Zhongji Innolight, Eoptolink Technology and TFC Optical Communications — issued statements on Friday voicing confidence in the sector’s long-term outlook, in an apparent effort to reassure investors amid the recent market selloff.
Analysts at Morgan Stanley said they remained cautious on Chinese equities, saying “weak domestic demand and liquidity headwinds persist, while valuations have yet to reach an outright bottom.”
Recent weakness in A-shares has been driven by disappointment over Beijing’s piecemeal stimulus efforts for a two-speed economy that is booming in exports but sputtering at home, traders and analysts said.
“The slump stems from insufficient fiscal stimulus and disappointing earnings, in our view, as policymakers have opted for incremental measures rather than the substantial packages seen in 2024,” analysts at RBC Wealth Management said in a note.