China shares up from 20-month low

China's main share index climbed by almost 8% on Wednesday on reports that the government is set to intervene to revive investor confidence.

The Shanghai Composite Index closed at 2,523.3 after reports that the government will pump as much as 400bn yuan ($58bn; £31.2bn) into the economy.

The index had fallen to a 20-month low on Monday and has down by about 60% from its peak in October last year.

Shares in stockbrokers gained the most, with many up 10%.

Short-term rebound?

The gains in China lifted sentiment in Hong Kong where the benchmark index recovered from a one-year low.

The Hang Seng index rose 2.2% to end at 20,931.3.

But analysts doubted the rally signalled an extended recovery and, until a stimulus package was confirmed, they predicted further declines.

“Some kind of correction to the market’s steep fall is reasonable”, said Chen Huiqin, analyst at Huatai Securities.

“The index may move between 2,300 and 2,600 points for a while as everybody waits to see if the positive news is confirmed.”

China shares soared last year, but have fallen sharply amid fears that a slowdown in the Chinese economy will knock profit growth.

Power producers were some of the only stocks not to join in Wednesday’s recovery, despite the government raising wholesale electricity prices by 6%.

Analysts considered the price increase would not be sufficient to help power plants offset the costs of higher coal prices.