By Daniel Inman
SHANGHAI--Chinese stocks bounced higher on Tuesday as Shanghai
made a partial recovery from the dive it suffered in the previous
trading session.
The Shanghai Composite closed up 1.8% at 3173.05, with the
market rebounding from its worst decline in more than six years on
Monday--a 7.7% drop that was sparked by the securities regulator's
move to crack down on margin trading.
The market was calmed by comments made by the securities
regulator after trading ended Monday. A spokesman for the China
Securities Regulatory Commission said the agency didn't intend to
knock down the market with its regulatory action, according to
Xinhua, China's official news agency.
Analysts, however, expect trading to remain volatile, as the use
of borrowed money to buy stocks moderates. "It will take time for a
lot of the leveraged money to come out of the market," said Howhow
Zhang, director of research at consulting firm Z-Ben Advisors.
The gains on Tuesday were broad, with 935 stocks gaining
compared to losses in 31. The market, however, was held back by
more big fails in financials stocks, especially brokerages. Citic
Securities Co. (600030.SH) and Haitong Securities Co. (600837.SH),
two companies penalized by the regulator, fell another 9.9% and
8.8%, respectively. Some large banks were also caught up in the
financial-stock rout, with China Construction Bank Corp.
(601939.SH) and Bank of China Ltd. (601988.SH) each down 0.7%.
Monday's decline has also raised expectations of further easing
from the central bank. In November 2014, the market went into
overdrive after a surprise interest-rate cut. Bank of America
Merrill Lynch said the correction in stocks could result in a cut
to the reserve-requirement ratio for banks in the coming weeks--a
move that would allow banks to lend more freely.
China also released a batch of economic data on Tuesday.
Although the country's gross domestic product was below the
government target, industrial production and retail sales each beat
estimates.
Write to Daniel Inman at daniel.inman@wsj.com