China stocks surge for second day as support measures calm nerves

SHANGHAI (Reuters) - China stocks bounced sharply for the second day on Friday, reversing an early-week slump in frenetic trading as markets regained a measure of composure following a barrage of government support steps to stem the rout.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 5.4 percent, to 4,106.56, while the Shanghai Composite Index gained 4.6 percent, to 3,877.80 points.

For the week, the CSI300 was up 5.7 percent and the Shanghai Composite rose 4.5 percent, their first weekly gains since mid-June.

"Chinese investors move in herds. After panic selling drove the market down to the extreme, prices are now starting to move in the other direction," said Samuel Chien, a partner of Shanghai-based hedge fund manager BoomTrend Investment Management Co.

The relative calm in mainland markets followed a flurry of government measures this week as policy makers scrambled to put a floor under a stock market that had tumbled around 30 percent in just three weeks, wiping trillions of dollars off the market value.

These measures include banning listed companies' big shareholders from selling shares over the next three months, directly buying stocks and mutual funds through China's state margin lender with liquidity support from the central bank, and limiting shorting activities in stocks and stock index futures.

Only six stocks fell on Friday, while shares of 1,452 listed companies rose, most of them hitting the upward limit of 10 percent.

Around 1,300 of China's listed companies - nearly half the market - remained suspended after a scramble by firms earlier in the week to escape the carnage by having trading in their stock halted. About 60 companies resumed trading on Friday.

Banking heavyweights underperformed the broader market, with the CSI300 bank index up only 0.8 percent.

(Reporting by Samuel Shen and Pete Sweeney; Editing by Shri Navaratnam)