September 27th, 2012
11:04 AM GMT
Hong Kong (CNN) – After hitting three-and-a-half year lows earlier this week, China stocks bounced 2.6% on Thursday.
What gives? Market rumors, and China prepping for a week-long holiday.
As the Financial Times reports, the People’s Bank of China pumped a record amount of cash into the financial system this week – RMB365 billion (US$58 billion) – to help the cash crunch that’s driving up borrowing costs.
Despite the record, it is not uncommon for big liquidity injection ahead of holidays, as millions of Chinese head to ATMs to take cash out for their vacation. Weak industrial production numbers this week also heightened expectations of action to prop up the market from Beijing.
The Shanghai Composite, China’s benchmark bourse, went under 2000 yesterday – seen as key level that might prompt action from Beijing. The market swirled with rumors that China’s Securities Regulatory Commission would announce some action on Thursday, although those proved unfounded.
As one analyst told CNNMoney’s Charles Riley: "We are at this stage where any silly comment provides a squeeze," said Michael Hsia, a sales trader at Louis Capital. "The gist is that people are looking for any excuse to get into the market."
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