2nd LD-Writethru: China stocks stage strong rebound in afternoon session

Chinese stocks staged a strong rebound in the afternoon, with the benchmark Shanghai Composite Index rising more than 3 percent.

Chinese stocks closed in the negative territory on Monday despite the central bank's unexpected simultaneous cuts of interest rates and reserve requirements for banks.

The Shanghai Index closed 3.34 percent lower while the Shenzhen Index lost 5.78 percent. More than 1,500 shares on the two bourses fell by the daily limit of 10 percent.

The benchmark Shanghai Index has slumped more than 20 percent from a peak of 5,178.19 points on June 12, following moves to cool debt-fuelled rallies and investors' concerns about bubbles.

Widely considered as a move to forestall further decline, the People's Bank of China announced on Saturday to simultaneously cut China's interest rates and reserve requirement ratio, the amount of cash banks are required to hold.

The last time the central bank made such a concerted easing effort was back in late 2008 at the height of the global financial crisis.

However, the forceful combined easing failed to soothe the rattled investors on Monday who believe soaring stock prices pushed up by a frenzy of speculation are unsustainable.

The Shanghai Index slumped more than 7 percent in the early afternoon but managed to claw back some ground before the closing.

There are cheerful news for the market as well. An official draft guideline released on Monday gave China's pension fund the nod to invest in the stock market.

It restricts the maximum proportion of the investment in stocks and equities to 30 percent of the fund's total net assets. Outstanding contributions to the fund stood at 3.06 trillion yuan (around 500 billion U.S. dollars) at the end of 2014. Endi