The stock market rebounded 2.53 percent yesterday after five straight days of decline, buoyed by an aggressive US interest rate cut that also lifted other markets.
The rally came after the People's Bank of China again raised the bank reserve requirement ratio.
The benchmark Shanghai Composite Index rose 92.71 points to close at 3761.61, with 789 of 911 stocks closing higher. The Shenzhen Component Index surged 4.45 percent to close at 13044.2.
Turnover on the two bourses amounted to 132.03 billion yuan, up 14.6 percent from Tuesday. Total capitalization rose 2.7 percent to 24.11 trillion yuan.
Markets across Asia also rebounded yesterday. The Hang Seng Index rose 2.26 percent to close at 21866.94. In Japan, the Nikkei 225 Index jumped 2.48 percent to close at 12260.44.
In the near term, "the bank reserve requirement ratio increase will serve to keep a lid on negative investor sentiment," Jing Ulrich, chairman of JPMorgan Securities China Equities, said.
Sun Mingchun, an economist at Lehman Brothers, said the government is likely to be cautious about raising the interest rate in the near term.
"With the Fed cutting rates aggressively, further rate hikes would likely attract more capital inflow, creating further headaches for the central bank to mop up liquidity," said Sun, adding downside risks to economic growth due to the global economic slowdown cannot be ignored.
Tianjin companies led yesterday's rally, after reports the city got government approval to set up the mainland's first over-the-counter equity bourse.
Stocks in the energy sector also performed well after the government released a plan on Tuesday for renewable energy development from 2006 to 2010, which is expected to boost industry development.
Investor worries were eased by reports of a 10.9 percent rise in property prices across major cities. Real estate developer Vanke A surged 9.56 percent and Poly Property soared 8.58 percent.
But questions remained about the government's next move and the specter of falling corporate earnings. "We expect further measures in the coming months," Ulrich said.
Source: China Daily
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