China Stocks Close Higher, Post Biggest Monthly Loss Since Global Crisis

China stocks rose more than 3 percent on Friday, recovering losses at the end of a tumultuous week, having recorded their worst month since the global financial crisis.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended up 3.2 percent, to 2,946.09, while the Shanghai Composite Index gained 3.1 percent, to 2,737.60 points.

Both indexes tumbled over 20 percent in January, their biggest monthly loss since the 2008-09 global financial crisis.

For the week, CSI300 was down 5.4 percent, while SSEC lost 6.1 percent.

Trading was light throughout the month, as many investors are giving the market a wide berth, burnt not just by January’s slump, which has taken indexes back to 2014 levels, but also last summer’s 40 percent crash.

Beijing orchestrated a “National Team” response to the previous crash, taking regulatory action to arrest the selling and urging state-linked buyers to support the market, but there has been little sign of that in January.

“Market bulls have failed to organize meaningful resistance, the ‘National Team’ didn’t inspire investors, while speculators chose to stand on the sidelines,” said Zhang Mingyu, chairman of hedge fund house Shanghai YJ Investment Management Co.

“The market has been overwhelmed by gloom and looks like a bottomless pit,” he added.

China’s faltering economic growth, which slowed to a 25-year low last year, is giving investors pause, putting pressure on the yuan currency, and encouraging capital to flow out of the country.

The Finance Ministry said on Friday its fiscal revenue grew 8.4 percent last year, its slowest pace since 1988, but its expenditure jumped 15.8 percent as it increases spending to cushion the slowdown.

At the beginning of the month, the yuan was of greater concern to investors than fragile Chinese stocks after the People’s Bank of China (PBOC) spooked markets and emerging market rivals with its second sharp depreciation in the currency in six months.

It has since calmed fears of an imminent and much larger devaluation by holding the yuan’s daily midpoint rock steady day after day, though many analysts still suspect the currency will be allowed to trickle lower over time.

In the latest move to stem pressure on the currency from capital flight, the authorities on Thursday asked several domestic funds to postpone issuing new outbound investment products, sources told Reuters.

Premier Li Keqiang also phoned International Monetary Fund (IMF) chief Christine Lagarde to pledge Beijing would keep the yuan “basically stable” and improve communication with financial markets on the currency.

“The Chinese government has no intention to promote exports through currency depreciation, nor will it launch a trade war,” Li told Lagarde in the call, according to remarks published on a central government site.

Likewise, speculation that Hong Kong might be forced to give up its peg to the U.S. dollar has waned in recent days.

Ratings agency Moody’s on Friday said it believed Hong Kong’s large fiscal and foreign-exchange reserves would allow policy makers to handle any pressure on the peg.