By Dong Zhixin (chinadaily.com.cn)
Updated: 2008-02-04 11:42

Chinese stocks rebounded sharply on Monday to recover part of the steep losses in the past two weeks, after regulators ended a five-month freeze on stock-oriented investment funds.

At mid-day, the benchmark Shanghai Composite Index gained 6.23 percent to 4,590.11 points, after hitting a six-month low at 4317.91 on Friday. The gauge lost some 20 percent since mid-January due to concerns about the fallout from a possible US recession and worries about tight monetary policy.

Monday's rally came after the China Securities Regulatory Commission (CSRC) gave the green light to CCB Principal Asset Management Co. and China Southern Fund Management Co to launch two funds expected to raise 14 billion yuan for equity investment.

In addition to injecting more cash into the market, the release was seen as a sign that regulators would not like to see further falls, boosting the confidence of investors who were wondering last week whether the bull run is coming to an end.

Analysts also saw Monday's rise as a natural rebound after several days of deep falls which were called an over-reaction to a global sell-off.

Gains on Wall Street on Friday also helped boost investor faith, as China's equity market is increasingly integrated with their global counterparts, albeit mainly in psychology.

More than 90 percent of the stocks in Shanghai and Shenzhen posted gains.

Aluminum Corp of China Ltd jumped to its 10 percent daily limit, after its parent Chinalco said it teamed up with US aluminium producer Alcoa to buy 12 percent of Rio Tinto.

PetroChina which has the biggest weighting in the Shanghai Composite Index jumped 4.55 percent to end the morning session at 25.53 yuan per share, against a 6.51 percent increase alongside its rival Sinopec.

Industrial and Commercial Bank of China, the country's biggest lender, rallied 6.84 percent to 7.19 yuan, followed by a 5.81 percent gain in Bank of China.