China shares up from 20-month low

China's main share index climbed by almost 8% on Wednesday on reports that the government is set to intervene to revive investor confidence.

The Shanghai Composite Index closed at 2,523.3 after reports that the government will pump as much as 400bn yuan ($58bn; £31.2bn) into the economy.

The index had fallen to a 20-month low on Monday and is down by about 60% from its peak in October last year.

Shares in stockbrokers gained the most, with many up 10%.

The gains were driven by a report issued by JP Morgan Chase that claimed Beijing was close to introducing measures to boost faith in continued company profitability.

Some kind of correction to the market's steep fall is reasonable

Chen Huiqin, analyst, Huatai Securities

The bank's analysts said the plan could include tax cuts and measures to support the fragile property market.

The rally drove up shares in Hong Kong, where the benchmark index recovered from a one-year low.

The Hang Seng index rose 2.2% to close at 20,931.3.

"The market has been pacing up and down at low levels for a long time. Investors have all been waiting for a chance," said An Yun, a strategist at Shenyin Wanguo Securities.

Short-term rebound?

But other analysts doubted the rally signalled an extended recovery and, until a stimulus package was confirmed, they predicted further declines.

"Some kind of correction to the market's steep fall is reasonable," said Chen Huiqin, analyst at Huatai Securities.

"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."

China shares soared last year, but have fallen sharply amid fears that a slowdown in the Chinese economy will knock profit growth.

Power producers were some of the only stocks not to join in Wednesday's recovery, despite the government raising wholesale electricity prices by 6%.

Analysts considered the price increase would not be sufficient to help power plants offset the costs of higher coal prices and government caps on retail tariffs.

Shares in Huaneng Power, China's top electricity provider, fell 4.5% in Hong Kong, while smaller rival Huadian Power, also listed in Hong Kong, fell almost 10%.

Source: BBC News