BEIJING • Chinese stocks rallied yesterday, sparking the benchmark index's biggest intraday swing since 1992, on speculation that the government will take steps to prevent bear market losses from deepening.

The Shanghai Composite Index rose for the first time in four days, jumping 5.5 per cent to 4,277.22 at the close, the most since March 2009. The gauge swung 432 points from the highs and lows, propelling a volatility measure to a seven-year peak.

An industry group representing brokerages called on investors and fund managers to take responsibility to stabilise the market after a weekend interest-rate cut failed to stem a rout.

"After the recent correction, investors might think stocks are oversold and hope regulators will introduce further measures to support the market," said analyst Shen Zhengyang of Northeast Securities Co in Shanghai.

"The fund industry association's remarks on stocks might also have boosted investor confidence."

Speculation is growing that policymakers are preparing support measures after the Shanghai Composite plunged more than 20 per cent from a June 12 peak amid surging valuations and concern that record-high levels of borrowing to buy stocks were unsustainable.

The Economic Observer reported the government is considering steps including a reduction in the stamp tax, while the finance ministry said it will allow the pension fund to invest in shares. The government is considering a delay in the initial public offering of China Nuclear Engineering Corp, according to sources.

Investors should look at stock market risks from a long-term and rational point of view, according to a statement from a sub-committee of China's Asset Management Association.

BLOOMBERG