China share prices rebound; yuan up
(AP)
Updated: 2005-09-29 20:19

China share prices rebounded Thursday following several straight days of losses after regulators announced the launch of a fund to protect securities investors. The yuan edged higher.

The benchmark Shanghai Composite Index surged 2.1 percent to 1,155.49, after closing at a near two-month low in the previous session. The Shenzhen Composite Index gained 1.8 percent to 281.63.

The investor protection fund will be used to compensate creditors of bankrupt brokerages or brokerages that are taken over by the securities regulator, the China Securities Regulatory Commission, the central bank and Ministry of Finance said in a joint notice in major securities newspapers.

The company to manage the fund began operating Thursday.

"The establishment of the fund will help resolve problems caused by troubled brokerages," said Shi Honglin, an analyst at Qinhai Securities.

Market participants welcomed the move, saying it reflects the government's determination to boost investor confidence in the scandal-ridden markets.

"The news gave a boost to sentiment and triggered bargain hunting in the market, which fell sharply in recent sessions on concerns over share reform," said Simon Wang, a strategist at Xiangcai Securities.

Companies with domestically traded, Chinese yuan-denominated shares as well as foreign-currency denominated shares surged on a report by the Xinhua News Agency suggesting that they would be encouraged to launch shareholding reforms.

Huaneng Power International's shares surged 2.7 percent to 6.04 yuan, while China Petrochemical & Chemical soared 4.6 percent to 4.13. Both companies have Hong Kong dollar-denominated shares traded in Hong Kong.

In currency dealings, the yuan gained against the U.S. dollar, closing at 8.0930. It ended Wednesday at 8.0939.