Chinese shares up 4.5% as momentum spreads

Chinese shares continued to rally on Friday, gaining momentum from Thursday's dramatic rebound as drastic government measures to support the volatile market started to have an impact. The Shanghai Composite closed up 4.5% at 3,877.80 after ending the previous session up nearly 6%. The government intervened after stocks had fallen by third since mid-June. Hong Kong's Hang Seng was closed up 2.08% to 24,901.28. Measures to stem the sell-off have included banning major investors from selling shares, and ordering others to buy, although there were a number of companies' shares that could not be traded at all as they were suspended during the rout. Other moves include a ban on short-selling, a suspension of initial public offerings along with injecting money into the market through margin lending. These strong moves by the government to restore order in the market could backfire, according to Evan Lucas, market strategist at trading firm IG: "[Its] firm response to the past 18 days of turmoil does "create perceptions that further liberalisations and free market principles will be abandoned as Beijing grapples with additional regulations". "This will create longer-term issues," he added, as analysts started to question what will happen to the market once those measures are removed.