China stocks up 4 pct but sentiment remains wary

SHANGHAI Aug 20 (Reuters) - China's benchmark stock index jumped 4.1 percent on Thursday, led by oil firms and Yangtze Power (600900.SS), as signs of official support for the market helped to trigger technical buying after a 20-percent dive in the two weeks up to Wednesday's close.

The Shanghai Composite Index .SSEC was trading at 2,900.684 points at 0618 GMT.

Traders said, however, that investor sentiment remained cautious.

"Today's rally indicates the bulk of the corrective pressure accumulated during the market's bull run earlier this year has now been removed," said analyst Wu Nan from Xiangcai Securities in Shanghai. The index had jumped more than 90 percent before its slump over the past two weeks.

"But we cannot say that a day's rally means a decent technical rebound has already been established. It takes time for investor confidence to be restored."

Traders said a convincing breach of resistance at the five-day moving average, at 2,901 points on Thursday afternoon, could be taken as the first sign of a well-established rebound.

Among signs of government support, the China Securities Regulatory Commission granted approval to three exchange traded funds (ETFs) to trade Chinese stock indexes and to two stock-oriented funds over the past several days, state media reports said.

Yangtze Power was up 5.0 percent at 13.44 yuan after it said its parent company had bought a 1 percent stake in the listed company in a move to support its share price.

During the depths of another market slump in the second half of last year, regulators pushed the parents of major listed firms to buy their listed units' shares to support the market.

PetroChina (601857.SS), the most heavily weighted stock in the index, gained 5.31 percent to 13.68 yuan. ($1=6.833 Yuan) (Reporting by Claire Zhang and Edmund Klamann; Writing by Lu Jianxin)