Shanghai stocks jump 5.34% as US gains drive relief rally

Shanghai stocks closed up 5.34 percent on Thursday, cheered by a rally on Wall Street and a domestic interest rate cut this week aimed at boosting the world's second-largest economy, dealers said.

China's benchmark Shanghai Composite Index surged 156.30 points to 3,083.59 on turnover of 404.3 billion yuan ($63.1 billion).

It briefly dipped into negative territory, falling 0.71 percent, but finished near the day's high after a late surge, halting the steepest five-day rout since 1996.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, jumped 3.33 percent, or 56.45 points, to 1,752.21 on turnover of 361.0 billion yuan.

"Heavyweight stocks like banks and insurance companies helped pull up the (Shanghai) index, and it's possibly China Securities Finance entering the market again to shore up stocks," Zhang Gang, a strategist at Central China Securities in Shanghai, told Bloomberg News.

Beijing launched a rescue package for shares after a year-long rally collapsed in June, which has included funding the China Securities Finance Corp. to buy stocks on behalf of the government.

Wall Street broke a six-day losing streak on Wednesday after hints the US Federal Reserve would put off raising interest rates sparked a rally following days of turmoil over China.

The S&P 500 closed up 3.90 percent, the Dow added 3.95 percent, and the Nasdaq Composite was up a heady 4.24 percent.

The gains came after an influential member of the US Federal Reserve's monetary policy board said the impetus for a rate hike next month, as some had been predicting, had faded amid the turmoil gripping world markets.

Hong Kong shares also jumped on Thursday with the benchmark Hang Seng Index adding 3.60 percent, or 758.15 points, to close at 21,838.54 on turnover of HK$122.43 billion (US$15.80 billion).

- 'Expect further volatility' -

China on Tuesday reduced interest rates and cut the amount of money banks must hold in reserve -- its second such double move in two months -- to try to bolster its economy and end the country's worst stock market rout in almost two decades.

But some analysts voiced caution, saying trading on China's markets would remain choppy as a stock market bubble deflates.

"Investors should expect further volatility," Catherine Yeung, a Hong Kong-based investment director for Fidelity Worldwide Investment, told Bloomberg News.

Shanghai stocks closed down 1.27 percent in choppy trading on Wednesday, extending days of falls despite the rate cut.

Analysts say the latest interest rate reduction -- the fifth since November -- is not enough to reverse slowing growth with more aggressive measures required.

Trading on Chinese stock markets has been highly volatile for weeks, with Shanghai losing around 40 percent of its value since a year-long, debt-fuelled rally collapsed two months ago.

Financial shares led the gains in Shanghai. Banking giant ICBC jumped 4.69 percent to 4.24 yuan and Citic Securities surged 7.03 percent to 15.38 yuan.

Railway-related firms also rose in Shanghai. China Railway Construction shot up by its 10 percent daily limit to 12.01 yuan and China Railway Erju also gained 10 percent to 10.51 yuan.

In Hong Kong, shares in Cnooc -- China's biggest offshore oil and gas explorer -- jumped 14 percent to HK$9.22 in their biggest gain since 2008 after its first-half earnings beat consensus, despite a collapse in oil prices.