Shanghai Bounces Back

BEIJING, Feb. 28, 2007 — -- The Shanghai stock market bounced back today from the previous day's record sell-off.

The Shanghai Composite Index rose by 3.94 percent, closing at 2,881.07.

Tuesday, the benchmark index nose-dived by 8.8 percent, registering its largest decline in a decade and triggering a record decline in Wall Street and other markets around the world.

Chinese investors decided to continue buying shares despite the global sell-off after government authorities moved to boost their confidence.

Finance officials used a front-page report in the state-owned Shanghai Securities News to deny the rumor about a plan to impose a tax on capital gains by retail investors. State media blamed this rumor for Tuesday's panic-selling.

Sensing the gravity of the situation, Premier Wen Jiabao also reiterated the importance for China to "focus on ensuring financial stability and security," signaling the government's determination to prevent any market meltdown.

The bullish comments in the state media appeared to encourage nervous domestic investors, who account for virtually all trading in China. Strong buying by government-controlled institutional investors and overseas funds also helped to boost market sentiment.

The index of the smaller Shenzhen stock exchange jumped 3.19 percent. State media reported that nearly 1,200 stocks listed in the Shanghai and Shenzhen markets had recorded price increases, including 200 stocks that surged by 10 percent, the ceiling for a trading day.

The rebound in China's stock markets bucked the trend in Asian and European markets, which fell for a second day.

Stocks in Japan, South Korea, Singapore, India, Australia and the Philippines all declined by more than 2 percent. Britain's benchmark index fell 1 percent in morning trading, while France's index was off by more than 2 percent.

Today's closing index puts the Shanghai stock market within range of reaching the 3,000 mark, which it did last Monday when bullish investors returned from the weeklong Lunar New Year break and pushed the index to a record high of 3,040.60.