China stocks rise 4.9 percent; rumor of official aid

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".

The biggest bank and the most active share, Industrial & Commercial Bank of China (601398.SS), shot up 7.84 percent to 6.05 yuan on Friday.

PetroChina (601857.SS), the biggest stock, rose 5.18 percent to 17.87 yuan. In early trade it sank to a record low of 16.70 yuan, the price in its Shanghai initial public offer last October, and the fact it did not break below the IPO price -- as three other major stocks did this week -- relieved the market.

Ping An Insurance (601318.SS), which had dropped more than 50 percent since mid-January in response to its plan for a huge equity issue, climbed 8.47 percent to 53.14 yuan.

There were some early technical signs that some large caps might be bottoming out. For example, ICBC's rise broke its shorter-term downtrend line from mid-January, at 5.84 yuan; a second straight close above resistance at 6.00 yuan, which was support in early March, would target roughly 6.60 yuan based on the height of the stock's previous consolidation channel.

But analysts said it was not clear if the worst of the bear market had passed. "No one knows if this is another trap or a safe floor for the moment, or if the rebound is only a pause in the steep slide," said Zhou Lin at Huatai Securities.

Some investors believe authorities or big institutions might have artificially supported PetroChina and other large caps on Friday in an effort to avoid further panic, but that the index could still slide further in the long term as an expected slowdown in the economy this year hit corporate profit growth.

Among gaining shares on Friday, Bright Dairy (600597.SS), China's third-largest dairy producer, jumped its 10 percent daily limit to 11.44 yuan after saying it had obtained approval from the government to raise milk prices. It said it expected to raise prices by 14 percent in certain regions.

Telecom giant China Unicom (600050.SS) advanced 3.47 percent to 9.25 yuan after saying its net profit in 2007 surged 166 percent.

Shanghai International Airport (600009.SS) gained 4.68 percent to 24.60 yuan after saying net profit rose 12 percent.

Among losers, Zhejiang Supor Cookware (002032.SZ) tumbled its 10 percent daily limit to 22.92 yuan after being suspended since January 17 while the firm completed a share restructuring plan related to the acquisition of a major stake in it by France's SEB

(SEBF.PA).

($1 = 7.01 yuan)

(Reporting by Claire Zhang; Editing by Andrew Torchia)