SHANGHAI stocks rose in the morning session after the Chinese central bank cut the Reserve Requirement Ratio for commercial banks.

The Shanghai Composite Index climbed 0.88 percent, or 20.78 points to 2,377.96 by noon break, the highest level since December 2. Turnover stood at 49.8 billion yuan (US$7.9 billion).

The People's Bank of China announced on Saturday that a cut in the RRR by 0.5 percent point would be effective on February 24, the first cut in 2012.

The central bank cut the RRR in December after tight monetary polices resulted in 12 upward adjustments since January in 2010.

"The cut will pump about 400 billion yuan into the system," said Aijian Securities. The broker recommended increasing holdings in blue chips.

Oil producers, coal miners, non-ferrous metal producers and financials rallied on speculation that the improved liquidity would bolster economic growth, further extending the key index's five-week winning streak.

"PBOC will make more cuts on the reserve ratio in the future, as an extension of the micro adjustment of its monetary policy, however a significant relaxation is very unlikely," said Gao Yong, analyst at Sealand Securities.

The central bank said last weekend that it would maintain a prudent monetary policy as the country faces pressure to support growth and contain inflation.

Industrial and Commercial Bank of China, the country's largest lender, added 0.46 percent to 4.41 yuan. Bank of China gained 0.66 to 3.04 yuan. China Everbright Bank jumped 1.01 percent to 3.01 yuan.

Source:shanghaidaily