May 31, 2017 / 7:23 AM / a year ago

China stocks rise, but gains pared as investors weigh new trading rules

SHANGHAI, May 31 (Reuters) - China stocks ended higher on Wednesday, but the bulk of early gains were erased as investors sought to weigh the impact of new trading rules on bulk selling.

The blue-chip CSI300 index closed up 0.4 percent, at 3,492.88 points, while the Shanghai Composite Index added 0.2 percent to 3,117.18 points.

During May, the SSEC lost 1.2 percent, its third straight monthly loss, while the CSI300 gained 1.6 percent.

Both main indexes jumped in early morning trade, as investors cheered government rules to restrict “intensive” and “viscous” selling by shareholders, but the initial euphoria quickly evaporated as investors contemplated the rules’ side effects.

Regulators’ intention is to prevent massive selling of shares and to stabilize the market. But for shareholders with no intention to sell, the rules “would prod them to sell sooner, for fear sales restrictions would only become tougher in future,” said Wang Yu, strategist a Pacific Securities.

Echoing that view, UBS strategist Gao Ting wrote:

“The new regulations could be easily interpreted as stabilizing the market in the short term ... However, we don’t think this is a decisive factor that could determine medium-range movements in the stock market.”

A Reuters poll also found Chinese fund managers kept their suggested equity exposure for the next three months unchanged from the previous month, reflecting widespread caution amid tighter regulations and liquidity conditions.

For the day, sentiment was somewhat lifted by an official survey showing China’s manufacturing sector grew faster than expected in May. (Reporting by Luoyan Liu and John Ruwitch; Editing by Richard Borsuk)

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