Vincent Yu / AP Photo

China stocks rebound on Wall Street rally

China stocks rebounded sharply, breaking a losing streak as local and foreign investors hunted for bargains

China stocks rebounded sharply on Thursday, snapping a savage losing streak, as Wednesday’s rally on Wall Street brought some calm to shaky global markets.

Local and foreign investors hunted for bargains in China after a more than 20 percent plunge in the country's major indexes over the past week.

But traders said the market remained vulnerable to sudden selloffs, as investors who bought shares using margin financing continue to deleverage, and as China's economic outlook remains weak.

The blue-chip CSI300 index jumped 6 percent to 3,205.64, while the Shanghai Composite Index gained 5.4 percent, to 3,083.59 points.

Both indexes posted their biggest one-day percentage gains in nearly two months.

"From today, I'm no longer pessimistic," said Jiang Chao, a strategist at Haitong Securities. He correctly predicted China's stellar bull run, which ended in mid-June.

He predicted that China's central bank will cut interest rates further, which would make stocks attractive again, given the sharp drop in valuations during the recent crash.

The Shanghai Composite Index, whose sharp drop Monday triggered a global selloff, rose 2.2 percent to 2,992.99 points, rebounding from several days' declines. Tokyo's Nikkei 225 was up 2 percent at 18,753 and Seoul's Kospi gained 1.1 percent to 1,915.70.

The gains came after Wall Street rocketed up overnight. The Dow Jones industrial average soared more than 600 points, or 4 percent. That was its third-biggest point gain of all time and its largest since Oct. 28, 2008.

Hong Kong's Hang Seng advanced 2.3 percent to 21,573.56 and Sydney's S&P ASX 200 gained 1.6 percent to 5,254.00. Benchmarks in Taiwan, Singapore, Bangkok and Jakarta also rose.

Traders were encouraged by comments from William Dudley, president of the New York Federal Reserve Bank, that the case for a U.S. interest rate hike in September “less compelling to me than it was a few weeks ago,” given China's troubles, falling oil prices and weakness in emerging markets.

“Traders took the cue to buy,” said Nicholas Teo of CMC Markets in a report.

Following a six-year run-up in U.S. stocks that has pushed major indexes to all-time highs, investors worry the economy could falter if the Fed raises rates too soon.

Panicked selling over the past week was triggered by declines in China, but analysts said it had no basis in economic developments. The Shanghai index has lost more than 40 percent of its value since soaring to a peak June 12 and then plunged despite a multibillion-dollar government intervention.

Analysts said there are probably more roller-coaster days ahead because of worries about China and a possible Fed rate increase.

The slide in the Dow over the past week wiped out some $2 trillion in stock value in the U.S.

The broader Standard & Poor's 500 index jumped 72.90 points, or 3.9 percent, to 1,940.51. It was the S&P's best day in percentage terms in nearly four years. The Nasdaq composite rose 191.05 points, or 4.2 percent, to 4,697.54.

Wire services

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