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SHANGHAI: A flood of capital from three initial public offering refunds and new subscriptions to seven mutual funds combined to push the lead indicator up 2.18 percent yesterday, after dropping a combined 3.4 percent the previous two days.
The benchmark Shanghai Composite Index climbed 105.61 points to close at 4941.78, with 797 out of 910 stocks closing higher. The Shenzhen Component Index rose 1.95 percent to close at 16387.01.
Turnover on the two bourses amounted to 124.88 billion yuan, up 31.4 percent from Tuesday.
Around 3.4 trillion yuan was refunded into the market from three IPO subscriptions: Goldwind Science and Technology, China's leading wind generator sets producer, China Pacific Insurance and Liaoning Publishing.
In addition, seven existing mutual funds reopened for subscription yesterday, which will likely inject new capital into the market. Other mutual funds may follow suit, analysts said.
Investor sentiment was further boosted by positive comments from Li Rongrong, minister of the State-owned Assets Supervision and Administration Commission (SASAC), who was quoted as saying by the official Shanghai Securities News that the enterprises directly under SASAC management have no plan to largely sell off shareholdings in listed companies.
"The stock market received support at 4800 points, which was widely seen by market traders as a reasonable level to buy in stocks," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.
Stocks in the steel sector led the rally yesterday. Baosteel, China's largest steelmaker, jumped 4.74 percent to close at 16.79 yuan, while Wuhan Iron and Steel soared 7.14 percent to close at 17.86 yuan.
"In the process of eliminating outdated production capacity, large-scale steel companies with strong cost control ability will finally stick out and gain more market share," said Ren Linna, an analyst at Essence Securities.
Stocks in the financial and real estate sectors rebounded in yesterday's trading after a sharp fall. "Bargain hunters began to snap up those stocks," Wu said.
China's largest real estate developer Vanke A jumped 2.02 percent to close at 27.8 yuan. China Life surged 3.04 percent to close at 56.63 yuan, and the Industrial and Commercial Bank of China rose 2.34 percent to close at 7.88 yuan.
But analysts warned that investors should control the stock-holding percentage in upcoming weeks because listed companies' profit growth is expected to slow as the government is pledging to tighten monetary policy.
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