WIDESPREAD hopes the government will launch more market-support policies — after its latest attempt failed — drove mainland shares to end sharply higher yesterday.

    The benchmark Shanghai Composite Index ended up 4.2 percent, or up 130.54 points, at 3,278.33, marking its third consecutive gain so far this week. The Shenzhen Composite Index rose 4.9 percent to 960.21.

    Analysts said the Shanghai index was likely to test psychological resistance at 3,400 today.

    “Some investors are betting that the government will unveil other market-boosting measures after Sunday’s new share-sale rule failed to spark a sustainable rally. The markets will rise sharply if the government does so and these investors want to buy ahead of the wave,” said Great Wall Securities analyst Zhang Yong.

    The Shanghai index surged nearly 7 percent at Monday’s opening after the securities regulator said Sunday that investors who want to sell previously non-tradable shares that make up more than 1 percent of a company’s share capital would have to do so on the bulk trading systems of China’s bourses. Investors regarded that move as a fresh sign of government support.

    But the gains were short-lived as investors shifted their attention to expectations of imminent macroeconomic and monetary tightening.

    The Shanghai index dipped below 3,000 for the first time in more than a year Tuesday, touching 2990.79, or down 37.7 percent since Jan. 1.

    However, investors turned positive yesterday.

    “The new share sale rule didn’t work, so the government should do more to lift the markets in order to achieve the results it wants, the reasoning goes,” said Haitong Securities analyst Zhang Qi.

    “Chinese investors tend to be motivated more by the government than by companies’ fundamentals,” Zhang said.

    Brokerages led the gains yesterday because the sector’s earnings outlook would benefit the most if markets improve, analysts said.

    CITIC Securities rose 4.9 percent to 58.92 yuan (US$8.42), Northeast Securities surged 6.9 percent to 26.90 yuan, while Sinolink Securities hit the 10 percent upside limit at 37.05 yuan.

    Despite the sharp gains, analysts are generally still cautious about the near-term outlook for the markets.

    “If more market-supportive moves aren’t introduced over the coming week, the indexes may once again slip below 3,000. Hope alone can’t get the markets going for more than a few days,” Haitong’s Zhang said.

    Great Wall’s Zhang attributed yesterday’s gains to short-term investors.

    “Once they take quick profits, the indexes will fall again, because investors are still fragile after six months of turmoil.”

    China Merchants Bank, China’s biggest dual-currency credit-card issuer, advanced 1.31 yuan, or 4.2 percent, to 32.42 yuan, the highest close since April 11. The company said first-quarter profit jumped 157 percent to 6.32 billion yuan on wider margins and higher fee income.

    “There are lots of solid earnings and that helps the market,’’ said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai. (SD-Agencies)