* CSI300 +2 pct; SSEC +1.4 pct; HSI +0.9 pct
* Official media chant bullishly after Tuesday’s tumble
* Government wants a slow bull market, not a crazy bull - investors
By Samuel Shen and Nathaniel Taplin
SHANGHAI, May 6 (Reuters) - Chinese stocks rebounded sharply on Wednesday as investors piled into the market after the previous session’s tumble, encouraged by a chorus of upbeat official media commentaries declaring the bull market was not over.
The CSI300 index rose 2.0 percent to 4,688.52 points by the end of the morning session, while the Shanghai Composite Index gained 1.4 percent to 4,356.70 points.
Hong Kong stocks followed mainland markets higher. The Hang Seng index added 0.9 percent to 28,006.91 points, while the Hong Kong China Enterprises Index gained 1.8 percent to 14,333.43.
China’s stock market has almost doubled in the past year, driven by ample liquidity and expectations of more government stimulus to support flagging growth in the world’s second-largest economy.
But a combination of concerns over tougher margin trading rules, a fresh wave of listings and speculation of a hike in stamp duty on stock trades triggered the biggest one-day loss in nearly four months on Tuesday.
The stamp duty rumour apparently stemmed from a research report by Changjiang Securities, but the brokerage said it was a misinterpretation, highlighting investor fears of a hard-handed crackdown on speculative trading by the government.
But in an unusual move to calm investors, the official Xinhua News Agency published three articles to explain why the bull market was changing gear, not direction.
“Both regulators and stock investors hope to see steady and healthy development of the market,” said a Xinhua analysis.
“In the medium term, there’s adequate upward momentum, so market bullishness will continue,” the report said, citing loose monetary policy and the trend of people moving money into equities.
In the other two Xinhua articles, analysts were cited saying that the bull market had not ended and blue-chip companies were still undervalued.
Xiao Shijun, analyst at Guodu Securities in Beijing, said that regulators apparently want to protect the market.
“When the market is too hot, regulators flag risks; when the market sentiment is weak, they signal their support,” he said.
“After a period of consolidation...there will be a new round to the bull run.”
His view was echoed by David Dai, Shanghai-based investor director at Nanhai Fund Management Co.
“The government wants a slow bull market that can last for one or two years,” Dai said. “But if the market rises too fast, the bull market will end in several months.”
China’s two stock exchanges have become the world’s biggest stock market in terms of turnover as investors flood into the market. But they have borrowed a record amount of money to buy stocks, pushing valuations of some companies to astronomical levels and raising concerns about financial risks if prices suddenly collapse.
UBS estimates that 6-9 percent of China’s market capitalisation is funded by debt, including around 1.7 trillion yuan ($274.15 billion) worth of margin financing and other types of financial channels such as umbrella trust products.
$1 = 6.2010 Chinese yuan Additional reporting by Shanghai Newsroom; Editing by Jacqueline Wong