Share prices recovered on the mainland bourses on Monday after Thursday's sell-off as stable economic data and market-friendly gestures by the People's Bank of China, the central bank, [Offshore Company Incorporation]bolstered investor sentiment.

The benchmark Shanghai Composite Index rose 4.71 percent to 4,828.74 points on Monday on turnover of 934.5 billion yuan ($150.7 billion).

Activity in China's factory sector edged up to a six-month high of 50.2 in May although export demand continued to shrink, according to the official Purchasing Managers Index, indicating that the policies unveiled to bolster economic growth are finally bearing fruit.

Investors' sentiment has improved steadily, as the central bank said it wants to see a "healthy" stock market and will introduce a new board for strategic emerging industries on the Shanghai Stock Exchange.
ADVERTISING

The PBOC made the statement on Friday in a report, just a day after the benchmark index tumbled 6.5 percent.

Analysts said the announcement will pacify investors who had previously anticipated that the PBOC's open market operations were a signal of the monetary easing tapering.

"The open market operation conducted by the central bank which drained capital had triggered concern about liquidity among investors," said a Guotai Junan Securities Co report.

Jing Ulrich, vice-chairwoman of Asia Pacific at JP Morgan Chase & Co, said on Monday that the bank "remained positive on the A-share market although there was a sharp correction.

"Many global stock index providers are planning to include A shares into their indices, [Company Registration in USA]which will encourage large capital inflows into Chinese capital market in the future," she said.

It is likely that the benchmark will return to the 2007 bullish peak of more than 6,000 points within a year or two, but with a much healthier price-earning ratio of about 20 times compared with 40 times eight years ago, she said.