SHANGHAI (AFP) - Shanghai stocks rose more than three per cent by mid-morning Monday after the government unveiled its biggest package of measures so far to shore up the slumping market, but an initial ner 8 per cent surge was pared as analysts questioned their effect.
The Shanghai Composite Index climbed 3.39 per cent, or 124.81 points, to 3,811.73 by mid-morning, although it erased some of an initial 7.82 per cent rally at the open.
The Shenzhen Composite Index, which tracks stocks on China's second exchange, was up 1.40 per cent, or 29.32 points, to 2,127.80. It had opened 6.55 per cent higher.
Hong Kong shares meanwhile sank 3.17 per cent in mid-morning trade Monday as concerns about Greece's possible exit from the eurozone wiped out initial gains fuelled by Chinese moves to support slumping mainland markets.
The Shanghai market had plunged by almost 30 per cent over the three weeks to Friday, prompting the government to intervene over the weekend.
On Sunday, the government said the central bank would provide liquidity through the state-backed China Securities Finance Co., which manages margin trading, to "protect the stability of the securities market", according to the stock market watchdog.
Separately, watchdog the China Securities Regulatory Commission also said on Sunday that there would be no initial public offerings (IPOs) "in the near future", according to a statement. State media said 28 companies whose flotations have already been approved would postpone them.
On Saturday, China's 21 largest brokerage firms announced they would invest at least 120 billion yuan ($19.3 billion) in so-called "blue chip" exchange traded funds (ETFs).
The moves come after other actions last week - including an interest rate cut, relaxed rules on margin trading, and proposals to let the state social security funds invest in equities - failed to arrest hefty declines.
"The series of market-saving steps will be able to effectively reverse fragile market sentiment as it is a combination of measures led by the State Council," Zheshang Securities analyst Zhang Yanbing told AFP, referring to the country's cabinet.
"This type of state-led market-saving has never been seen before, even when the market crashed during the last financial crisis," he said, referring to the global economic meltdown of 2008.
But other analysts took a more cautious view, questioning whether the gains were sustainable following the sharp rises of the past year.
"It (the policy package) is different from past measures in the sense that this is a government move initiated by Premier Li (Keqiang) instead of any single department," Northeast Securities analyst Shen Zhengyang told AFP.
But he added: "What matters the most is the market performance after Monday."
Mainland Chinese markets were among the world's best performers earlier this year, with Shanghai rising more than 150 per cent in a spectacular borrowing-fuelled bull run in the 12 months to its top on June 12.
"As often the case, it is hard to tell if the fresh measures will help," Bernard Aw, Singapore-based strategist at IG Asia Pte, told Bloomberg News.
"However, this may just work if investors believe that the authorities and industry will just come out with stronger measures should the current batch fall short again."