China's benchmark Shanghai Composite Index jumped nearly 7 percent early Monday after the market watchdog announced a new policy for freshly tradable shares, though it ceded most of that gain as trading progressed.In a move viewed as a market-stabilizing measure, the China Securities Regulatory Commission announced late Sunday that shareholders that want to sell large numbers of shares newly freed from lock-up periods must do so through the "block trading system." That requires such sales to be made through private negotiations between buyers and sellers of the large chunks of shares.

The rule, which applies whenever more than 1 percent of a listed firm's total shares are sold within a month, is expected to slow trading of such shares as they become tradable after initial public offerings or shareholding reform lockup periods, analysts said.



The Shanghai Composite Index rose 6.8 percent early in the session but gave up most of that surge in early trading. By midmorning it was trading up 2.2 percent at 3,162.78.

The rule was issued after a volatile week that saw the benchmark index drop by more than 11 percent — taking it to a level nearly half of its all-time high of 6,124.04, reached in mid-October.

Market heavyweight PetroChina gained 3 percent by midmorning to 16.50 yuan.

The new rule on newly tradable shares was aimed at alleviating investors' fears that billions of shares flooding into the market as lockup periods expire would pull prices lower.

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