Chinese stocks rose 2.78 percent to their highest close in more than a week on Wednesday, led by financial and property shares as the market snapped a three-day losing streak. The Shanghai Composite Index closed at 2,468.192 points.
Gaining Shanghai A shares outnumbered losers by 834 to 89, while turnover in Shanghai A shares rose to 120.8 billion yuan ($17.7 billion) from Tuesday's 90.6 billion yuan. Pudong Development Bank jumped 9.55 percent to 23.06 yuan ahead of its first-quarter earnings due for release on Thursday. Property sector leader China Vanke Co gained 4.01 percent to 8.30 yuan after reporting earlier this week that its profit rose 7.1 percent in the first quarter.
Analysts noted rumours in the afternoon of a possible imminent cut in interest rates and banks' reserve ratios, but they were sceptical of the rumours and warned investors that the day's rebound may be short-lived. Analysts said investors' attention seemed to be turning away from worries about a possible swine flu pandemic and toward reassuring signs about the outlook for market liquidity and that a resumption of IPOs was unlikely in the near term.
"Even overseas markets seem stable and are not overreacting to the swine flu news, so there is no need for Chinese investors to be pessimistic," said Huatai Securities analyst Li Wenhui. The official Securities Times reported on Wednesday that new loans extended by Chinese banks in April were likely to fall from March but not by much, according to Jiao Jinpu, deputy research head of the People's Bank of China.
Fears that a surge in China's bank lending in the first quarter of this year would lead to a credit drought later in the year looked overdone, however, with the overall supply of liquidity relatively stable. Coal shares were strong, lifted by China Shenhua Energy Co, which gained 3.08 percent to 24.74 yuan after posting a 17.2 percent rise in first-quarter earnings, fuelled by a surge in coal output.
China's Industrial Bank climbed 7.95 percent to 23.75 yuan. Analysts said stable earnings in the bank sector encouraged buying. Auto shares outperformed, with SAIC Motor jumping 7.20 percent to 11.47 yuan. Huatai Securities analyst Li Wenhui said investors were hoping for additional tax incentives for car purchases.
Most drugmakers slid after a surge the previous two sessions spurred by worries over the spread of swine flu, although some shares continued to rise. Henan Taloph Pharmaceutical lost 3.40 percent to 5.40 yuan after rising its 10 percent limit each of the previous two sessions, while China Animal Husbandry Industry Co, a maker of animal health products, rose 1.06 percent to 23.85 yuan after rising its 10 percent daily limit for a second straight day on Tuesday.
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