China's main stock index rises 1.18 percent

Financial heavyweights and other blue chips helped China's main stock index rise 1.18 percent on Thursday, but most stocks continued to fall because of worries about government policy and the supply of shares. The Shanghai Composite Index rebounded from Wednesday's 2.07 percent slump to close at 4,230.823 points, off an intra-day low of 4,147.054.
However, losing Shanghai stocks outnumbered gainers by 517 to 345. And in another sign of investor caution, turnover in Shanghai A shares slipped to 160.0 billion yuan ($21.0 billion) from Wednesday's 190.2 billion yuan.
China Life Insurance soared 8.25 percent to 43.42 yuan, which was bullish technically since it broke above the May peak of 42.88 yuan and triggered a double bottom formed by the March and June lows. The double bottom targets China Life's record intra-day high in January of 49.50 yuan.
Ping An Insurance also gained sharply, by 4.60 percent to 73.91 yuan. "Insurance companies are jumping today because they are anticipating a rise in interest rates, which would have a positive impact on their cash flow, and also because of the rise in their H shares," said Zhang Yong, analyst at Merchants Bank.
Higher interest rates could help insurers earn higher returns to pay for high-yielding policies sold in past years. Hong Kong-listed H shares soared on Thursday after Chinese regulators issued rules for the Qualified Domestic Institutional Investor (QDII) scheme, allowing Chinese brokerages and fund managers to invest in Hong Kong shares. Insurers may become major participants in the QDII scheme via mutual fund arms.
News in recent days of Shanghai IPO plans by big companies such as PetroChina and China Construction Bank has fuelled concern about rising supply of shares in coming months. The QDII announcement could siphon some money out of China's domestic stock market. And some industrial shares remained soft because of Tuesday's announcement that the government was removing or cutting export tax rebates on some 3,000 items.
While none of these factors is a major threat to the stock market, taken together they may prevent the market from rising further in coming days or weeks, traders said.
Many analysts said the index was likely to move sideways for a while below May's record high of 4,335 points, as Wednesday's fall had signalled the end of stocks' uptrend for the near term, while ample money from new investors would prevent major falls.