China's key stock index ended up 2.93 percent on Wednesday, reversing early losses as PetroChina, the most heavily weighted stock, rebounded sharply on speculation that Beijing may take steps to aid oil refiners. The benchmark Shanghai Composite Index ended at 3,544.186, after sliding to a four-week intraday low of 3,355.084 in morning trade.
Gaining stocks in Shanghai overwhelmed losers by 710 to 181, with more than 55 Shanghai- and Shenzhen-listed A shares jumping their 10 percent daily limit. Turnover in Shanghai A shares was active at 96.2 billion yuan ($13.8 billion), up from Tuesday's 88.6 billion yuan.
PetroChina ended 6.63 percent higher at 17.86 yuan after falling as low as 16.53 yuan during the session, below its IPO price of 16.70 yuan, as it came under pressure from rising crude oil prices. China's refiners have been unable to pass on higher crude oil costs due to state controls on fuel prices.
"There are plenty of rumours surrounding the oil sector in mainland media, including that Beijing will raise subsidies to oil refiners, loosen windfall taxes, and allow product prices to rise," said Alex Tang, research director at Core Pacific-Yamaichi International.
Shares in top Asian oil refiner Sinopec Corp, one of the day's 10 most actively traded stocks, leapt their 10 percent daily limit to end at 12.55 yuan. Several analysts doubted China would allow fuel prices to rise, however, due to concerns about inflation which is hovering near 12-year highs.
"This is just a rumour. The oil price carries a certain weight in the CPI and officials will not forget this, although subsidies are possible given the soaring price of oil," said Qiang Xiangjing, analyst at CITIC-Kington Securities.
Analysts said the government would be keen to shore up heavily weighted PetroChina's share price, especially as it seeks to promote market stability in the aftermath of last week's devastating earthquake, as well as to ensure stable fuel supplies.
China's stock market had slumped in recent sessions, with the benchmark index sinking to a four-week low on Tuesday on fears of the earthquake's impact on economic growth and inflation. More than 70,000 are dead or missing after the 7.9 magnitude earthquake hit south-west China.
Industrial and Commercial Bank of China, the country's biggest lender, ended 1.0 percent higher at 6.07 yuan, after weakening early in the session. Shanghai-based airlines tumbled as investors took profits after a surge on Tuesday when Ma Ying-jeou, who supports a near-term launch in direct commercial flights between Taiwan and the mainland, was inaugurated as Taiwan's President.
China Eastern Airlines Corp fell 2.53 percent to 10.42 yuan after racing up 6.26 percent on Tuesday. Power shares surged with Chongqing Jiulong Electric Power jumping its 10 percent daily limit to 7.21 yuan in active turnover. Traders noted expectations that the government would grant subsidies to bolster the power sector, which suffered damage from last week's quake, ahead of peak seasonal demand in the summer.