Beaten-up Chinese stocks were set for a fourth day of gain on Thursday after a change of leadership at the market regulator, shoring up expectation of further support measures as China heads into a long Lunar New Year holiday this week.
The blue-chip CSI 300 Index (.CSI300) pulled further away from last week's five-year low after fresh vows of support by state-linked buyers and Bloomberg reporting that President Xi Jinping would meet regulators earlier this week.
The cabinet on Wednesday said it would replace China Securities Regulatory Commission Chairman Yi Huiman with Wu Qing, a securities regulator veteran who has led the Shanghai Stock Exchange and is known for his tough line on market malpractice.
Meanwhile, inflation data underscored the challenge regulators have in stabilising markets while the economy continues to wobble. China is mired in disinflation, with data on Thursday showing consumer prices declined for a fourth consecutive month in January.
Producer prices also dropped, pointing to a still-fragile recovery in the world's second-largest economy.
A raft of regulatory measures to defend the stock market this year - such as suspending brokerages from borrowing shares for lending, curbing margin-lending and other derivatives, and even getting exchanges to halt selling by hedge funds - have barely helped.
State fund Central Huijin Investment has also stepped up investment in stock exchange-traded funds (ETFs).
"It seems that Beijing has noticed the sharply falling stock market," said portfolio manager Rob Brewis at UK-based Aubrey Capital Management.
"Hard to say how effective the new man is until we see some policies... (It) won't impact the economy or property market which seems to be the major problem, but might well instigate a bounce in the stock market."
As the S&P 500 (.SPX) closes in on the magic 5,000 level , Chinese blue chips (.CSI300) have fallen for six months in a row - a reflection of the rush of money fleeing China's crumbling stock markets.
Despite a rally in the past three sessions, the CSI 300 is down more than 2% for the year.
The Shanghai Composite Index (.SSEC) jumped 0.7% on Thursday, having risen more than 4% for the week thus far, but remains 4% lower in the year to date.
The central bank has also been busy trying to defend the yuan amid the stock market rout.
The People's Bank of China on Thursday set the midpoint rate around which it allows the yuan to trade - in a 2% band - at 7.1063 per U.S. dollar, 848 pips firmer than market estimates.
The onshore yuan last stood at 7.1927 a dollar, little changed following the release of inflation figures.
Its offshore counterpart rose 0.1% to 7.2045 per dollar.
