CHINA’S shares bounced back more than 3 percent yesterday as the government’s latest efforts to prop up values restored a measure of stability to the stock market.

    After a dramatic plunge of more than 8 percent in stocks Monday, China’s securities regulator announced probes into share dumping and pledged to buy stocks to calm the market, while the central bank hinted at more policy easing.

    That followed moves in recent weeks in which the authorities temporarily banned shareholders with large stakes from exiting their positions and issued a string of warnings against short-selling, or betting on falls in its domestic A-share market.

    “The possibility for A shares to rebound in the following month is quite big given liquidity is rich in the market now and short-selling ability has been largely curbed,” said Zhang Qi, an analyst at Haitong Securities in Shanghai.

    The Shanghai Composite Index broke a three-day slide to close up 3.44 percent yesterday and the CSI300 index of the largest listed companies in Shanghai and Shenzhen jumped 3.1 percent. The Shenzhen Composite Index closed up 4.13 percent.

    “While it is far too soon to see if the market has reached a more stable level... it seems that the comments by authorities, reassuring investors about their commitments to support the market, are working,” said Gerry Alfonso, Shanghai-based director of trading at Shenwan Hongyuan Securities.

    This week’s turbulence shattered three weeks of relative calm for Chinese equities, secured through heavy government intervention to arrest a precipitous selloff in late June and early July that wiped as much as US$4 trillion off share values.

    That sharp selloff alarmed foreign investors, who worried about potential wider damage to China’s economy and risks to its financial stability.

    Despite a slowing economy and weakening corporate earnings, China’s main stock indices had more than doubled over the year to mid-June, before the sudden swoon that saw them tumble more than 30 percent.

    The government’s response included an interest rate cut, the suspension of initial public offerings, relaxed margin lending and collateral rules and enlisting brokerages to buy stocks, backed by cash from the central bank.

    Monday’s selloff, which saw major indices suffer their biggest one-day loss in more than eight years, may have been partly due to authorities testing the water for withdrawing some of that emergency support. (SD-Agencies)