China's A and B shares jumped 2.5 per cent yesterday, led by a surge in the Shanghai Automotive Co Ltd, after the government pledged to support capital markets, brokers said.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, closed up 2.47 per cent at 1,398.01 points. It is among Asia's worst-performing markets this year, slumping since mid-April.

The Shenzhen market rose 87.64 points to 3,215.82.

Shanghai's hard-currency B shares gained 2.67 points to 106.41. Shenzhen's B shares gained 4.39 points to 258.59.

A resolution passed at a mid-October meeting of China's Communist Party leaders vowed to forge ahead with economic reforms and further the development of stock, debt and commodities futures markets, State media said.

"We must actively push forward reforms and the opening of the capital markets and expand direct fundraising from the markets," said a document published in official newspapers yesterday.

Support must be given to stock, debt and commodities futures markets, with measures to foster more institutional investors and expand the scale of corporate bond issues, the document said, but gave no details.

Investors cheered the decision as it made clear government intentions to develop the mainland stock markets in Shanghai and Shenzhen, established some 12 years ago, analysts said.

"The document published today has clarified an official attitude towards the markets," said Gui Haoming, a senior stock analyst at Shenyin and Wanguo Securities.

"It also places more emphasis on market development than a simple stress on supervision, offering relief for investors."

Chinese investors are known to heed official comments when it comes to stock trading as there has long been an argument among economists as to whether the socialist country needs stocks and, if so, to what extent the bourses should allow speculation.

More recently, a prolonged tightening of market supervision has triggered widespread investor jitters over whether the government may impose more curbs or even put a brake on stock trading, analysts said.

Yesterday's rise was also propelled by technical buying after share prices fell 16 per cent from mid-April versus a 40 per cent surge in the Hong Kong market, battered by several factors, including too many stock offers, brokers said.

But the rebound might lose steam soon due to various negative factors, including a tightening of bank lending, which will drain market liquidity, brokers said.

Although the resolution offered little detail, investors said they expected the government to publish concrete market-boosting policies in the future, brokers said.

Brokers also said investors were interested in large caps as such companies had generally posted good results this year, supported by a strong 8.5 per cent surge in China's economy in the first nine months compared with the same period last year .

"There is still a shortfall of funds on the market despite Wednesday's rise and that will cap the potential for further gains," said Shanghai Securities analyst Zheng Weigang.

The near-term resistance for the Shanghai composite index was seen at 1,450 points, or less than 4 per cent from yesterday's closing level, analysts said.

Oil giant Sinopec Corp, the largest company by capitalization on the Chinese bourses, closed up 3.39 per cent at 3.66 yuan (44 US cents). Cellular carrier China Unicom, the second-largest, added 1.53 per cent to 3.31 yuan (40 US cents).

On the foreign-exchange market, China's yuan ended one notch weaker versus the US dollar at 8.2766, near the stronger end of its managed trading range.

Dealers said the yuan had been firming piecemeal in recent sessions, hitting a rare intraday high of 8.2760 on Tuesday, as expectations increased of a revaluation of the yuan in the long term, though most analysts said this was unlikely in the short term.

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