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SHANGHAI : Chinese share prices closed higher on Tuesday after a roller-coaster day that saw the market recover from a huge plunge amid much uncertainty over whether the government would again step in, dealers said.
The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, ended the day up 96.7 points or 2.63 percent at 3,767.10 points.
Turnover in Shanghai reached 179.21 billion yuan (23.3 billion dollars), up from 145.98 billion yuan on Monday.
The market opened sharply lower as investors remained wary after Monday's decline of 8.26 percent, the biggest one-day fall in over three months, with the ripples of a share trading tax hike last week continuing to be felt.
The main index dipped as low as 3,404.14 points in Tuesday's morning session, a fall of 7.25 percent, before investors steamed back into market.
Trading has been extremely volatile since the government moved last week to cool the market, which has boomed this year after surging 130 percent in 2006, by tripling the stamp duty on stock transactions to 0.3 percent.
The yuan ended the day at 7.6418 against the US dollar, up from Monday's finish of 7.6503.
The government had only the previous week denied that such a move was on the cards and analysts said investors were wary that the authorities may take further measures to cool the market such as imposing a capital gains tax.
The government's move saw the market immediately come off record highs with a 6.5 percent slump on Wednesday last week, the first day of the higher stamp duty.
Shen Jun, Shanghai-based analyst with Shangzhenglian Consulting, said investors had lost some confidence about the government's handling of the market and stocks would remain volatile in the short-term.
"I think it's better for the government to leave the market alone and let it operate by itself. Unfortunately, it's those who were supposed to be protected who were hurt most by the stamp duty policy," Shen said.
"I think market sentiment has not recovered yet and the market will fluctuate in the coming days."
Nevertheless, analysts said the rebound on Tuesday was partly due to indications by the government that the sell-off after last week's stamp duty hike may have been in danger of becoming too severe.
"The supportive attitude from the government is very obvious as the reaction (to the stamp duty hike) was beyond their expectations," Shen said.
Official media announced on Tuesday that the China Securities Regulatory Commission had approved four new stock fund products, which could bring fresh funds of up to 40 billion yuan (5.26 billion dollars) into the market.
Investors had also gained some reassurance from three front-page editorials in official securities newspapers on Monday saying that the long-term uptrend in the market was intact despite the stamp duty hike.
"The editorials ... and the approval of new stock fund products both suggest that the government does not want the market to fall further. It wants a steady and stable market," said Cao Yan, an analyst at Soochow Securities.
Steel makers were buoyed by those looking for bargains, with Nanjing Iron and Steel closing up 9.65 percent to 12.38 yuan.
China's largest listed securities brokerage CITIC Securities, which was previously hit by concerns that the hike of stamp duty tax would hurt its commission income, jumped 8.16 percent to 58.48 yuan.
Hard currency B-shares in Shanghai and Shenzhen also closed higher on a technical rebound after recent sharp declines.
The Shanghai B-share Index ended up 23.44 points at 283.76 on turnover of 4.14 billion dollars and the Shenzhen B-share Index climbed 50.03 points to 659.31 on turnover of 2.19 billion Hong Kong dollars.
- AFP /ls
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