China's most-watched stock index rose modestly Monday, giving up early sharp gains, on news that the market watchdog has implemented a new policy for shares freed from lock-up limits.The Shanghai Composite Index gained 0.7 percent, or 22.30 points, to 3,116.98 by the close, after surging 6.8 percent early in the session. The Shenzhen Composite Index of China's smaller, second market fell 1 percent to 921.72. Market heavyweight PetroChina gained only 0.3 percent to 16.06 yuan, after rising more than 3 percent earlier in the day.

Moving to stabilize the markets, the China Securities Regulatory Commission announced late Sunday that shareholders who 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.

It "is set to counter selling pressure on the public market and help relieve investors' worries over the impact of share disposals," the CSRC said in a statement.

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 announcement came after a volatile week that took the Shanghai benchmark back to below where it was a year ago. Analysts said investors were looking for signs of support from policymakers amid worries over new shares, the uncertain economic outlook and market turmoil in the U.S.

"It's a sign the government wants to do something to prevent the market from collapsing," said Qian Qiyun, an analyst at Shenyin & Wanguo Securites.

But the announcement — front page news in almost all newspapers Monday — appeared to fall flat.

"They might need more policies in the future," Qian said.

"Market sentiment still needs more time to recover," said Zhang Xiuqi, an analyst at Guotai Junan Securities. "The more market-boosting policies, the more confidence," he added.

Major refiner China Petroleum & Chemical Corp., or Sinopec, sank 5 percent to 9.91 yuan after announcing that its net profit probably fell more than 50 percent in the first quarter from a year earlier, due to increasing costs.

Both Sinopec and PetroChina — China's two biggest state-controled oil companies — announced Monday that they would receive unspecified "appropriate" monthly subsidies for losses, retroactive to April 1.

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