BEIJING, July 9 -- The mainland's main stock index closed 4.58 percent higher Friday and may see further gains, analysts said, after financial stocks led a rebound from early losses that had extended the previous day’s 5.25 percent slump.

The Shanghai Composite Index finished at 3,781.348 points, after falling in the morning as far as 3,563.544. Analysts said the market found solid support when it dipped below the psychologically important 3,600 mark in early trade.

Financial shares such as Industrial & Commercial Bank of China (ICBC) helped to pull the market up after the index slid 1.45 percent to its intraday low. The sector had been the worst performer during Thursday’s rout.

ICBC, Friday’s most active stock, ended up 3.6 percent at 5.16 yuan. China Life Insurance, the index’s biggest mover, surged 6.62 percent to 41.88 yuan.

“The market rose as a result of a natural technical rebound from support,” Shanghai Securities analyst Guo Yanling said.

The index could rise above 4,000 in the coming days, drawing firm support from China’s strong economy, Guo said.

China’s business confidence index, issued by the National Bureau of Statistics on Friday, rose to a record high in the second quarter of 2007, reflecting expectations that the country’s economic growth, which has climbed at annual rate of at least 10 percent since 2003, would remain robust.

Looking at the charts, analysts said the index seemed to be building a double-bottom after nearing its recent low of 3,404 points, hit June 5, which they considered a strong near-term support level.

An extension of the rebound for another day could confirm the floor and set the stage for the index to rise in coming months to test its recent high of 4,311.997 points, set June 20.

But concerns about market liquidity and the government tightening monetary policy further will likely curtail any further gains in the near term, analysts said.

“Despite the rebound, I haven’t seen a sharp increase in trading volume, so it’s too early to say whether investors have regained confidence,” said Shen Zhengming, an analyst with Orient Securities.

Reflecting the recent caution toward the stock market, the number of new securities accounts being opened has fallen steadily. Latest official data show that 70,132 new A-share accounts were opened Wednesday, the lowest amount since Feb. 16.

The stock index had plunged Thursday due to supply worries as the government accelerates its approval of initial public equity offers.

Plans to issue 1.55 trillion yuan (US$204 billion) in special bonds to fund a State investment company also stoked worries about a diversion of liquidity from the stock market.

The market was further hurt early Friday by news that China ordered nine companies listed both in Hong Kong and on the mainland to give up tax breaks that allowed them to pay only 15 percent corporate income tax, versus 33 percent for other firms.

The policy was used in the 1990s to encourage Chinese companies to list shares in Hong Kong and was meant to be temporary, although local authorities allowed some companies to continue to receive the tax benefits.

Gaining stocks overwhelmed losers by 851 to 27, while 56 rose their 10 percent daily limit. Turnover remained relatively modest at 91 billion yuan, although that was up significantly from Thursday’s 73 billion yuan.

Investment firm TEAD Group outperformed the market, ending 7.29 percent higher at 29.15 yuan on news that it had increased its investment in its Bohai Securities unit.

(Source: Shenzhen Daily/Agencies)