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1st Ld-Writethru: China stocks higher as central bank reaffirms yuan stability

Xinhua, August 13, 2015 Adjust font size:

Chinese shares closed higher on Thursday as fears of further currency depreciation subsided following the central bank's reassurance that the yuan's value has "returned to market levels" after days of sharp correction.

The benchmark Shanghai Composite Index climbed 1.76 percent to close at 3,954.56 points and the Shenzhen Component Index gained 2.1 percent to close at 13,395.18.

Total turnover of the two bourses shrank to 1.08 trillion yuan (168.7 billion U.S. dollars), down from 1.1 trillion yuan on Tuesday.

The value of the yuan has gradually returned to market levels as the discrepancy between the central parity rate and the actual trading rate corrected after declines in the past few days, said Zhang Xiaohui, assistant governor of the People's Bank of China (PBOC).

Another senior PBOC official, Yi Gang, dismissed media reports that Chinese authorities had demanded a 10-percent depreciation in the yuan by the end of the year in hopes of rescuing the country's slipping exports, describing such reports as "completely baseless."

The central parity rate of the yuan weakened by 704 basis points on Thursday, or 1.1 percent, to 6.401 against the U.S. dollar on Thursday, narrowing from Wednesday's 1.6 percent and almost 1.9 percent on Tuesday.

The sharp falls came after the PBOC adjusted the exchange rate formation mechanism on Tuesday, a move designed to better reflect market development in the exchange rate of the yuan against the U.S. dollar.

The market entered negative territory in the morning on fears the prolonged yuan depreciation would destabilize the economy. Following the PBOC's reassurance of yuan stability, stocks rallied during afternoon trading, with nearly 200 shares rising by the 10-percent daily limit.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, added 2.4 percent to end at 2,684.26. Endi