CHINA’S stocks reversed early losses to end higher yesterday, aided by a rebound in banking shares even after the government set sweeping new guidelines to regulate asset management products.

The central bank issued the guidelines Friday to more strictly regulate asset management businesses, in the government’s latest effort to rein in the risky shadow banking sector which had been channelling money into stocks, bonds and property.

At the end of 2016, the collective outstanding volume of the asset management business was 102 trillion yuan (US$15.37 trillion), official figures show.

The blue-chip CSI300 index dropped as much as 1.5 percent in early trade but closed up 0.6 percent at 4,143.83 points, while the Shanghai Composite Index ended 0.3 percent higher at 3,392.40.

The heavyweight banking sector led the rebound with a 1.7 percent gain, powered by Ping An Bank leaping 8 percent to a 29-month high.

The draft guidelines will unify rules covering asset management products issued by all types of financial institutions and will set leverage ceilings on such products, but won’t have an immediate impact. There will be a transition period that lasts until June 30, 2019.

Still, there was a psychological impact on the market as it reinforced views that regulators will continue to tighten their grip on riskier areas of the financial system.

Views were mixed on the new rules, as some analysts expect tougher rules to curb money flows into the stock market from lenders and hurt liquidity levels. (SD-Agencies)