1st LD-Writethru-China Focus: China stocks continue rally

Chinese shares continued to rally on Friday as the market is recovering following weeks of sharp ups and downs.

The benchmark Shanghai Composite Index (SCI) gained 3.51 percent to close at 3,957.35, while the smaller Shenzhen Component Index soared 5.24 percent to close at 13,004.96.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, climbed 5.95 percent to end at 2,783.32.

Analysts believe the strong rises are likely to put an end to the recent volatility as both capital and confidence have been gradually replenished.

Over the past weeks, the SCI shed over 35 percent and the total valuation of A shares lost trillions of U.S. dollars during the plunges.

A government bailout has included pouring in funds, slowing new share offerings, restricting futures trading of stock index and encouraging owners of listed firms to increase holdings.

The central bank also took steps to ensure abundant capital flowing into the market.

On Friday, the combined turnover of the two bourses rose to 1.1 trillion yuan (nearly 180 billion U.S. dollars) on Friday, slightly up from Thursday's 1.08 trillion yuan.

Besides resurgent indices, another sign of recovery is companies resuming trading after a massive share suspension in the hope of averting the market rout.

Dozens of companies resumed trading on Friday, with some immediately surging by the 10-percent daily cap. Shares of GoerTek Inc., a startup electro-acoustic components maker that halted transactions on July 8, opened higher today and quickly hit the daily cap.

Data from the Shenzhen bourse showed the number of suspended companies is about to drop to normal levels.

With a better-than-expected 7-percent GDP growth in the second quarter, China's stable economy also helped to reassure investors.

Wang Baoan, director of the National Bureau of Statistics, said he is upbeat about the Chinese economy.

Speaking to the People's Daily and citing rosy figures on GDP, employment, inflation, agricultural production and income, Wang said, "The economy has shown signs of stabilization and recovery."

Chinese companies appear to have fared better in the first half of 2015 as the economy stabilized. Of all the companies that had released preliminary H1 financial reports as of Thursday, 60 percent, or 1,050, said their net profits had grown in the six months.

The market has been pulled back from the brink of collapse, but the affair has left its mark on investors.

Sun Xiwei, chief investment counselor of CITIC Securities, said most investors are acting prudently and that cautious market sentiment will prevail in the short term.

"After the lesson [learned from market turmoil], investors' risk control will greatly improve in future," Sun said.

On Friday, winners outnumbered losers by 917 to eight in Shanghai, and by 1,208 to 15 in Shenzhen. Nearly 500 firms rose by the daily limit.

Companies in aviation, railway construction and the military industry led the rises. Leading railway contractor, China Railway Erju Co. surged 10.01 percent to finish at 14.51 yuan, while China Spacesat Co. also jumped by the maximum margin to 49.14 yuan.

The stock market volatility has not dissuaded China from further liberalizing its financial sector. The State Council is considering granting several banks stock broker licenses in a test run, a business insider told Xinhua without disclosing specific timing. Endi