China's shares rose 1.7 percent on Monday, led by top steel maker Baosteel, as investors regained some confidence after Beijing halved stock duties to try to jumpstart a flagging market. But a spate of upcoming IPOs dimmed hopes for a sustained rally as they are expected to sap cash from the market, analysts said. China will cut duties levied on stock transactions to 0.1 percent of their value from 0.2 percent to try to lift stocks off five-and-a-half-year lows, the first such reduction since November 2001, official newspapers reported on Monday.
The benchmark Shanghai composite index closed Monday at 1,255.777 points after having jumped 2.5 percent to 1,265.949 points at the outset.
Pudong Development Bank, part-owned by US financial giant Citigroup Inc, was the third-most active counters.
Its A shares, open to select foreign investors, leapt 3.5 percent to 7.65 yuan.
The stock dived some 34 percent in 2004, underperforming the market's 15 percent fall, amid fears that Beijing's economic-cooling steps would hit banks' bottom lines.
Baoshan Iron & Steel Co Ltdleapt 2.2 percent to 6.14 yuan and is now up 8.1 percent over the past week.
It is seen as certain to post strong 2004 earnings, thanks to steel prices hovering at multi-year highs, analysts said.
"Stamp duties can reduce transaction costs and stimulate trading for a short while," said Ren Chengde, an analyst at Galaxy Securities.
"But the market is unlikely to see a significant rally in coming days given other negative factors," he added.
Investors were afraid that future IPOs would be sold at a significant discount to the market's average valuations, diverting cash away from existing stock.
Huadian Power, China's third-largest electricity producer, had raised $233 million in the country's first domestic share offer in five months.
It sold shares at 2.52 yuan each, or 14.8 times the firm's 2003 earnings, versus the market's average of 25 times.
"The most important factor now for the market is PE ratios," said Zheng Weigang from Shanghai Securities.