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China shares rally to recover after the biggest monthly drop in seven years

| Feb 01, 2016 12:50 AM EST

Although Chinese shares were able to recover some of the losses during the week ended Friday, the monthly drop was recorded to be the lowest in about seven years.

Although Chinese shares were able to recover some of the losses during the week ended Friday, the monthly drop was recorded to be the lowest in about seven years.

The shares closed on a high note on Friday, according to media reports, knocking off about 12 trillion yuan ($1.8 trillion) off the benchmark index value. According to reports, closing of the Shanghai Composite Index was recorded to be up by 3.1 percent, making up a little for the loss which was twice the amount that week. The loss was estimated to be 22.6 percent since beginning of January, the worst month since October 2008.

The figures, which were revealed by the media, also pointed to The CSI300 index of the largest listed companies in Shanghai and Shenzhen, ending up at 3.2 percent for the day. The estimated loss for the month stood at 21 percent, which was was the biggest decline since August 2009.

Responding to the previous crash, it was reported that Bejing build a "National Team" taking regulatory action to stop the selling. In spite of urging the state linked buyers to support the market, little signs were noticed to the effect in January. Zhang Mingyu, chairman of hedge fund house Shanghai YJ Investment Management Co., was quoted as saying that investors were not inspired by the national team, and speculators opted to stay on the sidelines.

He added that the market gloom was overwhelming and looks like a bottomless pit. The media reported that there was danger generated by falling markets, creating their own momentum. Those who have bought shares on borrowed money or have pledged their shares for collateral loans are being forced to either sell up or meeting margin calls.

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