THE Shanghai Composite Index rose today on speculation that the central bank will further cut the reserve requirement ratio, and Europe pledging US$195 billion to the IMF.

The key index rose by 0.16 percent to 2221.68 points in the morning, led by the cement sector, which jumped by 4 percent.

The People's Bank of China would lower the reserve requirement for banks in the near term, China Securities Journal reported today.

Yuan funds at financial instituions accumulated from foreign exchange purchases dropped 27.9 billion yuan (US$4.4 billion) in November compared to October, and stood at 25.46 trillion yuan, the central bank said yesterday.

"The funds raised from foreign exchange purchases are shrinking, and the liquidity via open-market operations has tightened," Chen Bin, senior investment consultant with Wanlian Securities, said in a report today.

"Stocks will further drop if the general expectation of lower reserve requirement ratios is not fulfilled," said Chen.

Eurozone finance ministers agreed to inject US$195 billion into the International Monetary Fund to widen financial support and assist bond markets, said Bloomberg.