SHANGHAI (AFP) — Chinese shares surged 7.63 percent Wednesday as hope sprung anew that Beijing would soon act to shore up the ailing stock market and boost the country's slowing economy, dealers said.
The rise was the biggest percentage gain in nearly four months, providing investors with a rare day of respite from a plunge of around 60 percent in the Shanghai bourse since a peak in October last year.
The benchmark Shanghai Composite Index, which covers both A and B shares, rocketed 178.81 points at 2,523.28 on turnover of 59.0 billion yuan (8.6 billion dollars).
The rise was the largest single-day percentage gain since April 24, when the marked rallied after a cut in stamp duty on stock trades.
Southwest Securities analyst Yan Li said Wednesday's rally "was triggered by ... talk that Beijing will launch measures to buoy the market."
The steps could address issues such as trading using borrowed money or new rules on how to handle a big surge in stock supply, as billions of shares previously "locked up" off the market become tradeable.
Wednesday's surge also followed a claim that China is considering an economic stimulus package of up to 400 billion yuan (58.4 billion dollars) to boost growth.
"The top leadership is carefully considering an economic stimulus package of at least 200 billion yuan to 400 billion yuan, or one percent to 1.5 percent of gross domestic product," JPMorgan Chase economist Frank Gong said in a note.
Gong did not cite any source for his information on the possible stimulus package. He was not available for comment when contacted by AFP on Wednesday.
The measures would include tax cuts, moves to stabilise the Chinese stock market and efforts to support the development of the housing market, Gong said in the research note.
Economic growth in China slowed to 10.4 percent in the first half of 2008 from 11.9 percent for all of last year. There are concerns that weakening export growth due to the global slowdown could further hit the Chinese economy.
Beijing has already signalled that ensuring stable growth has become a priority alongside beating back inflation. Experts say that indicates a spate of moves to tighten credit flow in China might have come to an end.
The Shanghai index initially fell by more than 1.60 percent Wednesday on lingering concerns over the expected share supply glut, high inflation and slowing growth.
But its subsequent rally boosted sentiment in other Asian markets, helping the region's bourses to end mostly up.
Financial companies and property developers leading the gains in China. Citic Securities rose by the 10 percent limit to 18.70 yuan, while China Life Insurance surged 9.3 percent to 25.41 yuan.
Poly Real Estate Group rose by the 10 percent daily limit to 15.07 yuan, while China Vanke jumped 8.4 percent to 7.46 yuan.
Power companies extended gains from Tuesday following a tariff hike. Datang Huayin Electric Power hit the 10 percent upside limit to close at 3.81 yuan, and Shanghai Electric Power rose 7.5 percent to 4.32 yuan.
The Shanghai A-share index rose 187.71 points, or 7.63 percent, to close at 2,648.75 on turnover of 58.7 billion yuan, while the Shenzhen A-share index jumped 50.30 points, or 7.21 percent, to 747.58 on turnover of 26.2 billion yuan.
The Shanghai B-share Index was up 11.50 points, or 7.60 percent, at 162.91, while the Shenzhen B-share Index added 16.36 points, or 4.37 percent, to 390.94.
The yuan closed the day at 6.8546 against the US dollar, up from Tuesday's finish of 6.8655.
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