China stocks rise 4.9 percent; rumor of official aid

By Claire Zhang

SHANGHAI (Reuters) - China's main stock index surged nearly 5 percent on Friday, its biggest daily rise since early February, as large caps rebounded and rumors of government aid to support stocks swept the market.

The benchmark Shanghai Composite Index .SSEC, which had dropped to a fresh 11-month low of 3,357.229 points in early trade, closed up 4.94 percent at 3,580.146 after touching a high of 3,590.753.

Gaining Shanghai shares outnumbered losers by 776 to 104, while turnover in Shanghai A shares climbed to a one-week high of 90.0 billion yuan ($12.8 billion) from Thursday's 76.7 billion.

But there was no official confirmation of the rumors, and so far authorities have shown no clear sign of taking strong action to support the market. An official at the China Securities Regulatory Commission, contacted by telephone, declined to comment.

"If these rumors turn out to be false, as has happened in the past, the market will just come back down again," said Zhang Qi, analyst at Haitong Securities.

According to the rumors, the government might soon announce measures such as a cut in the stock trading tax, the long-awaited introduction of stock index futures, or steps to facilitate the financing of share purchases.

On Thursday, the index tumbled 5.42 percent on worries about new share supply and slowing corporate earnings growth, bringing its losses so far this month to 22 percent.

Expressing investors' hopes for official intervention, the National Business Daily ran a front-page editorial on Friday titled "Saving the market would be saving China's economy".