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Chinese shares rebound in morning session
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13:56, April 21, 2008

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Chinese shares rebounded on Monday morning as investors were relieved by the latest regulatory measures to stabilize the market and a Wall Street rally on Friday.

The benchmark Shanghai Composite Index ended the morning session 54.28 points, or 1.75 percent higher at 3,148.94. It opened as much as 6.80 percent higher after diving nearly 4 percent to almost half of its highest level on the previous trading day.

The Shenzhen Component Index was up 72.25 points, or 0.64 percent, to 11,36.29 after soaring 7.46 percent at the opening.

On Friday, the Dow Jones index jumped 228.87 points or 1.81 percent to 12,849.36, boosted by gains on Wall Street Friday when earning reports raised hopes of an easing of the credit crunch.

China's securities regulator, the China Securities Regulatory Commission (CSRC), late Sunday ordered shareholders to sell stocks on the block trading system if they expect to sell a large amount of shares that were freed from the lock-up period.

When more than 1 percent of a listed firm's total shares are sold within a month, the holders should use the block trading system, the CSRC said.

Analysts say the measure is a move to shore up the stock market, after the benchmark Shanghai Composite Index plunged by 49.5 percent from its all time high in October last year.

"The stock market will recover from recent losses because the fundamentals of China's economy are good," said Hua Sheng, a Beijing-based economist.

Investor sentiment was weak on the lingering concerns that the huge amount of such shares would flood the market for cash and therefore sink share prices.

"If such shares are all to be traded on the bid trading system, the trading will be low-efficient as the volume is often restricted by the buying interest on the secondary market," a CSRC spokesman said in a statement.

"The trading will also exert huge pressure on the share prices and twist the pricing mechanism," the spokesman stated.

"The move will help ease the pressure on the secondary market and stabilize investors' expectation on the reduction of the holdings of such shares."

The move is an experience learnt from the mature market to promote a stable and healthy development of China's emerging and transitional capital market, said the spokesman.

The country's stock market is faced with more complicated internal and external factors, the spokesman noted, adding the external factors include the recent huge volatility on the global financial market, its bigger impact on the emerging markets, and the sustained price rises of energy, resources and grain.

The external factors have also affected the judgment and sentiment of domestic investors, the spokesman stated.

Banks and securities companies led the rise. Citics Securities rose 4.69 percent to 55.38 yuan. China Merchants Bank was up 3.88 percent to 30.49 yuan.

Aluminum Corp. of China (Chalco) climbed 4.74 percent to 19.88 yuan. PetroChina, the most heavily weighted component of the Shanghai index, edged up 0.62 percent to 16.12 yuan.

Source: Xinhua



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