Expectations of friendly policies help lift sentiment on mainland bourses

The A-share market continued its recovery on Thursday, amid investors' strengthened expectation of systematic government support for the healthy development of the country's capital market.

The Shanghai Composite Index edged up 0.13 percent to close at 2606.24 points, marking its third straight day of gains. The smaller Shenzhen index closed 1.14 percent higher at 7567.79 points. The ChiNext Index, China's Nasdaq-style board of growth enterprises, rose by 0.84 percent to 1286.33 points.

The Political Bureau of the Communist Party of China Central Committee, the Party's core leadership, announced late on Wednesday that the country will pay close attention to the increasing downside economic pressure, following a meeting on the current economic situation.

To cope with the pressure, it pledged to solve the challenges facing small, private businesses and to promote the healthy development of the capital market by implementing reforms.

It was the first time the top leading body of the CPC emphasized the capital market as one of the keys to bolstering the economy, the best news from the top profile meeting for the A-share market, said Hong Rong, founder of investor education platform Hongda Education and an MBA tutor at the Shanghai Advanced Institute of Finance.

"The announcement enabled investors to expect longterm arrangements to strengthen the A-share market's functions, rather than short-term market bailout measures," he said.

"Investors' expectation of systematic policies to support the private sector has strengthened with the announcement, which in turn boosted market sentiment," said Tang Yao, an associate professor with Guanghua School of Management at Peking University.

Tang added listed companies' profitability remains the fundamental determining factor of market confidence.

Analysts said investor sentiment also rose on the back of the probable tax rate reduction for securities transactions, as proposed by the draft of the Stamp Tax Law released on Thursday.

The draft kept the rate unchanged, at one-thousandth of the transaction volume as stipulated in current regulations, but granted the State Council the right to change the tax rate and the scope of included taxpayers.

"This arrangement was set primarily to provide convenience for using the stamp tax rate as a counter-cyclical tool to regulate pro-cyclical behaviors in the market," Tang said.

The rate can be cut to reduce transaction costs and increase liquidity during market downturns, while it can be raised to dampen speculation when the market is overheated, according to Tang.

Broad rises in technology shares set an upbeat tone for the market on Thursday, with sub-indices tracking companies engaging in biometrics and artificial intelligence up by 4.71 and 4.44 percent, respectively, according to financial information provider Wind Info.

Hong said the rise was underpinned by the call of the top leadership of the CPC to accelerate the development of the artificial intelligence sector on Wednesday, the sector's long-term prospects, and the sector's relatively low valuation level after previous drops.