Stocks rise on expectation of fresh govt, funds' support

Chinese investors look at prices of shares at a stock brokerage house in Nanjing city, East China's Jiangsu province, August 7, 2015.[Photo/IC]

Stocks rose on Friday after reports emerged that trillions of yuan funds will likely re-enter the equity market from a Chinese government agency and a bunch of China funds.

The benchmark Shanghai Composite Index rebounded 2.26 percent on Friday to close at 3,744.2 points. The smaller Shenzhen Component Index gained 2.67 percent to close at 12,753.05.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, surged 3.87 percent to end at 2,576.99.

The Chinese government agency tasked with buying stocks to prop up the country's wobbling markets is seeking an additional 2 trillion yuan ($322 billion) in funds, Bloomberg reported on Thursday.

Meanwhile, close to 300 China funds that oversee more than 1 trillion yuan are sitting on the sidelines with "ammunition" to enter the stock markets at any time, the Shanghai Securities News reported on Friday, citing its own calculations.

"My feeling is that funds in the stock market are quite sufficient now and there's very high possibility the market will rebound in August," said Zhang Qi, an analyst at Haitong Securities in Shanghai.

The A shares have seen their value wiped out by more than 30 percent since mid-June despite a slew of supportive measures from the Chinese government.

Goldman Sachs analysts estimate that the "national team" has potentially spent 860-900 billion yuan to support the stock market in June-July and the potential aggregate size of market-support funds is probably around 2 trillion yuan.

"This implies sufficient market-support funds to continue to provide a downside cushion to the equity market as the later stages of retail deleveraging unfold," the analysts said in a report.

Xinhua contributed to the story.