1st LD-Writethru: China securities watchdog denies pulling rescue funds

With China's stock market still in a nascent recovery, the China Securities Regulatory Commission (CSRC) has denied a market rumor that it is considering pulling stabilization funding used to stem heavy sell-offs after the recent sharp market decline.

"Stabilizing the market, maintaining investors' confidence and preventing systemic risk are still the goals for the CSRC," spokesman Zhang Xiaojun said in a statement on Monday, adding that the commission will do its utmost to fulfill these tasks.

"It is irresponsible for media to publish information that has huge market implications before verifying it with regulators," Zhang said, after a Monday report on www.caijing.com.cn claimed the CSRC was mulling how long to maintain the stabilization funding.

Chinese shares retreated from early gains in the morning following the report's publication, with the benchmark Shanghai Composite Index (SCI) dipping 0.43 percent to close at 3940.15 points at midday.

But they then closed higher in the afternoon after the release of the CSRC statement, with the SCI up 0.88 percent to close at 3,992.11 points.

China had one of the world's best-performing stock markets earlier this year, with the SCI up more than 150 percent in 12 months, partly fueled by margin trading. However, the index lost more than 30 percent in less than a month from a June 12 peak, as margin traders unwound positions and some investors cashed out.

The market has shown signs of recovery on the heels of rescue measures including major brokerages putting their own capital on exchange traded funds tracking the performance of blue chip stocks, and China's central bank supporting the liquidity needs of the China Securities Finance Corporation Limited, the national margin trading service provider, to increase share purchase and offer brokerage houses liquidity aid. Endi