China gets $9.4-bn central bank boost

Shanghai shares surge

China's central bank on Friday said it injected 60 billion yuan ($9.39 billion) into the inter-bank money market through short-term liquidity operations. This marks the second round of short-term liquidity operations this week; on Wednesday, the central bank had injected another 140 billion yuan.

The seven-day loans had an average interest rate of 2.35 per cent, the People's Bank of China said in a statement on its website.

Authorities announced pension funds managed by China's local governments would start investing two trillion yuan ($313.05 billion) in stocks and other assets as soon as possible. In further signs of government intervention, China's securities regulator said it would tighten margin requirements further for stock index trading to curb excessive speculation.

Shanghai stocks closed up 4.82 per cent on Friday, rising for a second day on strong US growth figures and a global market rally, as dealers speculated the government is also supporting the market.

China's benchmark Shanghai Composite Index surged 148.76 points to 3,232.35 on turnover of 474.6 billion yuan ($74.2 billion). Despite two days of substantial gains, the index still lost 7.85 per cent for the week.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, soared 5.40 per cent, or 94.62 points, to 1,846.83 on turnover of 425.0 billion yuan. It fell 9.44 per cent over the week.

In Hong Kong, however, shares fell 1.04 per cent, or 226.15 points, to 21,612.39 on turnover of HK$ 112.88 billion ($14.55 billion).

Dealers said a mixture of positive news boosted the markets, including a Chinese interest rate cut and stronger-than-expected US growth figures for the second quarter, which helped global markets to rally on Thursday.

"It's not one single factor pushing the market up," Zheshang Securities analyst Zhang Yanbing told AFP. "Several factors are working together, such as the rate cut and the local debt swap programme, and the rises in global markets."

The US economy grew much faster than expected in period from April-June, expanding at an annual rate of 3.7 per cent, official data showed on Thursday, rather than the 2.3 per cent previously estimated.

The news came after China on Tuesday cut interest rates for the fifth time since November and reduced the amount of money banks must keep on hand in a bid to stimulate the flagging economy.

The cuts helped spur a rally in Asian shares, even though analysts say more action will be needed to dispel fears about stalling Chinese growth that have hit global markets this week.