(Bloomberg) -- China stocks pared a drop in the afternoon as the country’s state-backed funds were seen buying large caps.
The SSE (LON:SSE) 50 Index of some of the country’s largest stocks was down 0.3 percent as of 2:14 p.m. local time, paring an earlier drop of 2.3 percent. Financial shares eked out gains. The Shanghai Composite Index fell 2.5 percent in the morning, then pared the drop to 0.7 percent. Hong Kong’s equities market was closed for the holiday.
Chinese shares slid in the morning along with equities in Japan, where the Nikkei 225 Stock Average fell into a bear market. The losses were triggered by the S&P 500 Index suffering its worst final session before the Christmas holiday on record.
"The gains by big banks and insurers suggest state buying, and some funds may also be bottom-fishing stocks," said Dai Ming, a Shanghai-based fund manager with Hengsheng Asset Management Co.
Kang Chongli, a Beijing-based strategist with Lianxun Securities Co., said the 2,500 level "is both a policy and technical bottom" for the Shanghai Composite Index. The gauge last traded at 2,506.37.
Chinese policy makers have pledged to do more to support a private sector hit by the slowing economy. The State Council said in a statement on Monday that the central bank will improve policies on targeted reserve-requirement ratio cuts and inclusive finance to further support private companies.
China’s stock benchmark is down 24 percent this year, in line for the worst performance in a decade, as a trade dispute with the U.S. escalated.
Agricultural Bank of China Ltd. added 1.3 percent, while Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. rose more than 0.5 percent.
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