Shares in Shanghai rebounded yesterday after the Shanghai Composite Index dived beneath 1,000 for the first time in eight years briefly. Industry watchdog confirmed it had suspended reviewing applications of new share sales in a bid to stem the continuing slide in the stock markets.
The shanghai index, which tracks both yuan-denominated A shares and hard-currency B shares, advanced 2.05 percent in the day to 1,034.38. The A-share Index also rallied 2.05 percent to 1,085.77, and the B-share Index rose 1.7 percent to close at 64.78.
During the morning session, the Shanghai index dipped to 998.23, the first time below 1,000 since February 24, 1997.
Shanghai's key stock index also saw the biggest fluctuation of any equity market valued at more than US$10 billion worldwide.
The shenzhen Composite Index, which tracks the smaller of the two Chinese markets, rose for the first day in five, adding 5.91, or 2.4 percent, to 256.33, its biggest gain since April 1.
"The decision of the regulator is helpful at present to restore the confidence of investors and to alleviate their fears of a likely share glut brought by the conversion of nontradable shares," said Chen Qun, a trader of West China Securities Co Ltd.
"The halt to new shares flotation showed the watchdog's determination to push forward the implementation of a pilot scheme to tackle the country's problem of a split share structure," she added. "Anything that may cast a blow to the market will be removed to smooth the reform's progress."
The china Securities Regulatory Commission said over the weekend that it has stopped receiving applications to raise funds, including initial public offering issue and additional share sales, said China Business Times, citing an unidentified source.
The trial share sale program was launched at the end of April and four firms were picked to test the reform in May. The local market then tumbled to a fresh nadir repeatedly.
The csrc said last Wednesday it will continue the program to dispose state shares by unveiling a second batch of companies.
The shanghai benchmark has lost 8.5 percent since the government announced the trial program aimed at disposing its nontradable equity holdings, which account for about two-thirds of China's more than US$300 billion market capitalization.
Just last week, Shanghai shares declined more than 3 percent.
The move to unlock the flood of nontradable shares was expected to incur an oversupply of stocks on the markets, and fanned concerns of dilution in the value of existing shares.
In addition to the suspension of the new share sales, the regulator also urged domestic fund managers to support the market during the trial sale of government-owned equities valued as much as US$245 billion.
"The call (by the regulator) was a boost to the market," said Eric Fang, a trader at Guotai Junan Securities Co Ltd in Shanghai. "People are taking the chance to buy shares."
Shang fulin, the chairman of the CSRC, urged funds to play a positive role and stabilize the stock market, the Shanghai Securities News said yesterday, citing Shang at a fund conference in Beijing on Sunday.
Shang suggested that funds should be fully aware of the favorable influence of the share structure reform on the long-term development in the fund industry.
China's funds hold more than 440 billion yuan (US$53 billion) and control 22 percent of tradable shares on the market, said the newspaper, a publication affiliated with Xinhua news agency.
China shipping Development Co, the mainland's biggest oil shipper, sailed 7.2 percent to 8.08 yuan.
Peter so, head of China research at Macquarie Securities Ltd in a June 1 report recommended investors buy China Shipping and other mainland shipping stocks, citing attractive valuations.