Shanghai Municipal Government : Shares rally 3.1% to snap 3-day losing stretch

An investor monitors stock prices at a brokerage outlet in Huaibei, Anhui Province, yesterday. The Shanghai Composite Index rallied 3.1 percent yesterday, ending a three-day losing streak. But the index slumped 22.7 percent in January, the steepest fall since October 2008.

Shanghai shares rebounded yesterday, snapping a three-day losing streak and paring the biggest monthly drop since 2008, as liquidity improved after the central bank pumped more cash into the financial system.

The Shanghai Composite Index rose 3.1 percent to end at 2,737.6 points on the last trading day of January. The gauge, however, slumped 22.7 percent for the month, the steepest fall since October 2008.

Investors have been spooked by share sales of major shareholders, an economic slowdown and yuan volatility while a short-lived circuit breaker mechanism amplified panic selling.

But the market started to react to good news such as the central bank's huge liquidity injection, share purchases by major shareholders and increasing foreign participation via the stock connect between the Shanghai and Hong Kong exchanges, said Guangzhou Wanlong Securities Consulting Co.

The People's Bank of China yesterday injected 100 billion yuan (US$15.2 billion) into the money market via reverse-repurchase agreements, bringing the net injection this week to a record 690 billion yuan.

The PBOC has pumped more cash via lending tools to prevent a liquidity crunch ahead of the weeklong Spring Festival which starts on February 8. The PBOC said late on Thursday that it would conduct regular daily liquidity operation between yesterday and February 10 to ensure ample funds through the holiday period.

Brokerages led gains on rosy earnings reports. CITIC Securities, China's biggest listed brokerage, increased 5.8 percent to 14.50 yuan after it announced an estimated 75 percent annual gain in net profit last year. Huatai Securities surged by the daily limit of 10 percent to 14.58 yuan.