SHANGHAI, July 20 (Reuters) - China stocks erased early losses and ended Monday higher, after the country's securities regulator reaffirmed its support for the market, denying a media report that the government was studying how to end its bailout.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.2 percent, to 4,160.61, while the Shanghai Composite Index gained 0.9 percent, to 3,992.11 points.
Analysts say investors are increasingly cautious as the Shanghai Composite index approaches 4,000 - viewed by many as a key psychological level.
Small caps extended their rebound, with Shenzhen's start-up board ChiNext up 2.3 percent, but banking stocks remained weak.
China's market has stabilized, after Beijing pumped hundreds of billion yuan of liquidity into the market through brokerages, mutual funds, and the state margin lender, to stem a recent rout.
Influential Chinese magazine Caijing reported on Monday that the China Securities Regulatory Comssion (CSRC) was studying channels for withdrawing government funds, which knocked indexes down in the morning.
At the midday break, CSRC reaffirmed regulatory support for the equity market, calling the Caijing report "untrue".
"The related media was irresponsible for making such a major market-moving report without checks with the supervisory department," it said.
Vice finance minister Zhu Guangyao said over the weekend that lessons needed to be learned from the recent market plunge, signalling his intent to focus on supervision and the development of new frameworks to make it possible to weather any future market turbulence.
On Saturday, China's central bank issued guidelines to regulate the development of internet finance. Internet-based peer-to-peer "fund matching" firms had played an active role in grey-market margin finance -- widely viewed as source of market volatility. (Reporting by Samuel Shen and Pete Sweeney; Editing by Simon Cameron-Moore)