thoughts about price tomorrow, page-96

Reuters

SHANGHAI -- China's main stock index jumped nearly 6 per cent because of hopes that the government would introduce a stimulus package to boost the slowing economy and aid the stock and property markets.

The Shanghai Composite Index ended the morning up 5.89 per cent at 2,482.642 points, near an intra-day high of 2,489.486. On Tuesday it hit a fresh 20-month, intra-day low, having dropped more than 60 per cent from last October's peak.

Gaining stocks in Shanghai outnumbered losers by 935 to one, with over 30 Shanghai A shares up their 10 per cent daily limits.

Turnover in Shanghai A shares expanded to 29.7 billion yuan ($US4.3 billion). That was still small compared to levels seen during last year's bull run but it exceeded Tuesday's full-day turnover of 27.6 billion yuan.

Frank Gong, chief China economist at JPMorgan Chase, wrote on Tuesday that China's leaders were considering an economic stimulus package of at least 200-400 billion yuan and might ease monetary policy by the end of the year.

"This will include tax cuts and measures to 'stabilise domestic capital markets' and support 'healthy development of the housing market'," he said.

Vice premier Li Keqiang said on Tuesday that China must increase domestic spending to keep growth on track as the global economy weakened.

Many fund managers and analysts said that with the contents and timing of any stimulus package unknown, it was unclear if the package would do much to halt a slowdown in economic and corporate profit growth. So stocks are not necessarily starting any kind of extended recovery, they said.

"But some kind of correction to the market's steep fall is reasonable, so the index may move between 2,300 and 2,600 points for a while as everybody waits to see if the positive news is confirmed," said Chen Huiqin, analyst at Huatai Securities.

Much of the market sees major technical support for the index at 2,245 points, its high for the year 2001.

Stocks surged across the board on Wednesday but brokerages led the gains because of hopes that a stock market recovery would boost their commission and underwriting income. CITIC Securities , the biggest listed brokerage, soared its 10 percent limit to 18.70 yuan.