After a deep market correction, China's shares rallied more than 4 percent Wednesday, on renewed hopes of fresh policy support to enhance capital market reforms.

The benchmark Shanghai composite index, grouping hard currency B shares and local currency A shares, closed up 4.22 percent at 1,355.226 Wednesday, reaching an intraday high of 1,374.036.

It was the second session of a strong rebound for the market, which started on Tuesday, when the index rose 3.2 percent.

Before that, for four consecutive sessions from last Thursday, the market experienced a sharp correction, with the Shanghai composite index falling below the psychologically important 1,300-point level to new five-year lows.

The Shenzhen sub-composite index also advanced 4.32 percent to finish at 3,210.31 Wednesday.

Li Ming, the fund manager of China's first listed open-ended fund with Southern Fund Management, said that investors' enthusiasm has been rekindled by the authorities' pledge to implement reform plans in capital markets.

The State Council urged stronger reforms of capital markets at a high-level meeting chaired by Premier Wen Jiabao on Monday, reaffirming an official declaration issued in February.

The pledge has to some extent restored investor confidence. They also expect more concrete measures to come out later on, Li said.

Moreover, market sentiment was also recovering as blue-chip stocks started to rebound. Such stocks, regarded as the flagships of their industries, are more closely linked with macroeconomic status.

After the sharp correction, the investment value of blue chips became more outstanding and the market risk has been largely digested, said Li.

However, many investors are still cautious, since the benchmark index is still down more than 20 percent from early April, hit by the authorities' macroeconomic controls aimed at cooling down the economy.

(China Daily September 16, 2004)