SHANGHAI'S key stock index soared above the 2,000 psychological barrier in the morning session as it was boosted by two government measures to stabilize the market roiled by the global credit crisis.
Shares surged more than 9 percent after the government said it will buy shares in three of the largest state-owned banks and it scrapped the tax on share purchases.
The benchmark Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, skyrocketed 9.46 percent, or 179.25 points to 2,075.09 points at 11.30am. All 874 companies rose.
The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, lost 8.87 percent, or 48.52 points, to 595.61 points.
The Ministry of Finance and the State Administration announced yesterday that China will scrap the 0.1 percent transaction duty for stock purchases and levy only on sales, effective today.
Meanwhile, China Investment Corp, the nation's US$200 billion sovereign wealth fund, will buy stakes in the country's big-three listed banks on the open market starting today, in a clear initiative to support the stable operation of major stated-owned financial institutions.
These measures injected investors with confidence and had an immediate upward effect on the market.
China's banks surged the most in almost a year led by the three biggest lenders. Industrial & Commercial Bank of China Ltd, Bank of China Ltd and China Construction Bank Corp, all surgedthe 10 percent limit, to 3.78 yuan, 3.36 yuan and 4.19 yuan respectively.
Bank stocks across Asia-Pacific climbed this morning after US shares rose after the US government said it was considering a plan to shore up the financial system. US Senator Charles Schumer proposed a new agency yesterday to pump capital into financial companies after Lehman Brothers Holdings Inc collapsed and the government stepped in to rescue its biggest insurer.
ICBC shares have fallen 54 percent this year in Shanghai, while Construction Bank has slumped 57 percent and Bank of China is down 49 percent. The central bank this week reduced the benchmark one-year lending rate while keeping the deposit rate unchanged, harming loan profitability.
Most financial companies jumped the 10 percent daily cap this morning. Haitong Securities Co, the country's largest listed brokerage by market value, jumped 10 percent to 15.42 yuan. Sinolink Securities Co and CITIC Securities Co both jumped 10 percent to 28.89 yuan and 17.88 yuan respectively.
Stocks also rallied as a government agency said it supported buybacks by state enterprises.
China's state-owned companies should be role models in promoting stable development of the nation's capital markets by buying back shares in the publicly-traded units, the State-owned Assets Supervision and Administration Commission said yesterday.
PetroChina, the country's largest oil producer and the market's biggest component, advanced 9.96 percent to 11.04 yuan. China Petroleum & Chemical Corp, the country's biggest oil refiner, surged 9.96 percent to 9.94 yuan.
China Vanke co, the country's largest publicly listed property developer, rose the 10 percent daily limit to 5.69 yuan. Poly Real Estate Group Co, China's second-largest developer by market value, gained 9.97 percent to 13.13 yuan while Shanghai-based Shimao Property Co added 9.96 percent to 7.95 yuan.