Stock Surge Shatters Records in Shanghai

In a spectacular turnaround that shattered every record on Shanghai’s roller-coaster stock market, investors Friday unleashed another buying wave that sent the index soaring by 108.50% for the week.

The Shanghai Class A share index for domestic investors surged 22.31% on Friday to 700.58 points.

Its twin on the market in the southern Special Economic Zone of Shenzhen added 10.52% to 165.92.

Share prices began rocketing Monday after Beijing announced a freeze on market growth this year and put forward a package of reforms that included a proposal to allow foreign funds into Class A shares for the first time.

Overseas funds are now restricted to the much smaller hard-currency Class B share markets.

On Friday, Shanghai’s B-share market was up 2.46% to 74.40 points and Shenzhen’s added 2.44% to 107.04.

While the announcement itself merely confirmed half-promises already made to investors, swamped by a tide of new issues this year, it was taken as a signal that Beijing was determined to rescue the stock markets, which have become crucial to China’s modernization plans.

Shanghai’s A-share index had plunged 80% since its high last year and the Shenzhen index had dived by 75%, raising fears of a complete collapse.

Many brokers dismissed Monday’s 36.14% gain in Shanghai as the work of large brokerages manipulating the index for short-term profit.

But as the surge continued, it became clear that small investors, who drove trading during the raging bull market of late 1992 and early 1993, were back in business.

On Thursday, turnover in Shanghai hit an all-time record $1.2 billion. Turnover Friday was only fractionally lower at $1.199 billion.

Brokers said investors had pulled funds out of bonds and bank accounts and poured cash into the Shanghai stock market, indicating the start of another sustained rally.

Bonds replaced shares as the favorite investment vehicle this year as the stock markets bombed. Bank accounts have been padded because of rising interest rates.