Equity markets in Hong Kong and the mainland gained on Friday, after the mainland's securities watchdog halted the circuit breaker mechanism. But market sentiment stayed weak, as the economy and renminbi remained under pressure.

The Hang Seng Index, the Hong Kong equity market benchmark, edged up 0.59 percent or 120.37 points to close at 20,453.71 on Friday.

Simultaneously, the Shanghai Composite Index rose 1.97 percent to 3,186.41 and the Shenzhen index rose 1.2 percent to 10,888.91.

"The rebound is weak, compared to the 7.4 trillion yuan ($1.12 trillion) that evaporated in the last four days," said Hong Hao, managing director for research at BOCOM International.

"The circuit breaker is just a trigger of market turmoil. Though it is removed, it doesn't do much in improving sentiment.

"The key issues remain the poor fundamentals and concerns over the accelerating depreciation of the yuan," Hong said.

The mainland equity market collapsed in the first trading week of 2016, in the crossfire of the weakening yuan, concerns over the expiration of a selling ban for major shareholders and a liquidity squeeze due to the newly adopted market smoothing mechanism.

CSI 300, the index tracking big caps on both Shanghai and Shenzhen markets, plummeted 12 percent from 3,731 to 3,284 during the first four days and triggered the circuit breaker twice.

In response, the China Securities Regulatory Commission (CSRC) suspended the circuit breaker late on Thursday and issued new rules which prohibit major shareholders from selling more than 1 percent of shares of their companies in the secondary market within three months.

However Bloomberg, citing insiders, said the "national team" was still believed to be behind the market on Friday. The government funding is said to be buying blue chips - especially the leading financial names.

The CSRC said on Thursday night that the "national team" - including the China Securities Finance Corporation Ltd - would stay in the market. Its role as a market stabilizer to strengthen investor confidence and prevent systematic risk would not change.

emmadai@chinadailyhk.com

(HK Edition 01/09/2016 page6)