A man passes a board showing the decline of Straits Times Index, Dow Jones Industrial Average and the Standard and Poor's index in Singapore's central business district on Monday. Picture: REUTERS/EDGAR SU
A man passes a board showing the decline of Straits Times Index, Dow Jones Industrial Average and the Standard and Poor's index in Singapore's central business district. Picture: REUTERS/EDGAR SU

SHANGHAI — Chinese share markets attempted a modest bounce on Friday to end a week of sudden falls, while Beijing tried to reassure the world it would not use a lower yuan to wage a trade war.

The benchmark Shanghai Composite Index edged up 0.8% in early deals, and then pulled back a bit to be up about 0.3%, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen added 0.5%.

Investors remained gun-shy, however, given that both indices have developed a nasty habit of sliding late in the session, often for no apparent reason.

Both have also hit depths not seen since 2014, bringing losses this month to about 25% or 13-trillion yuan ($2-trillion).

The People’s Bank of China (PBoC) did its part to keep the banking system flush with cash, pumping out a huge 690-billion yuan this week to avoid a liquidity crunch ahead of the Lunar New Year celebrations beginning in early February.

Late on Thursday, the central bank announced it would conduct more liquidity operations than usual between January 29 and February 19 to keep the system awash with cash through the holiday.

The PBOC also seems to have succeeded in calming market concerns about an imminent devaluation in the yuan, though many analysts still suspect the currency will be allowed to trickle lower over time.

The central bank held the yuan firm at 6.5516 per dollar on Friday, dimming memories of the surprisingly lower fix that so spooked markets early in the month.

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 promise that 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 it will launch a trade war," Mr Li told Ms Lagarde in the call.

Likewise, speculation that Hong Kong might be forced to give up its peg to the US 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.

Reuters