Hong Kong: Chinese stocks halted a three-day slide that sent the benchmark gauge into a bear market as traders weighed the prospects of government support against continued declines in margin trading.

The Shanghai Composite Index gained 3.4% to 4,189.45 at 1:05 pm. Investors sought a floor for stocks after a weekend interest-rate cut and speculation that regulators will halt initial public offerings failed to stem a rout that ended the nation’s longest-ever bull market.

“It’s clear that the authorities want to support the market but it’s also clear that what they’ve done so far hasn’t worked," said Tim Condon, Singapore-based head of Asian research at ING Groep NV. “This means we’ll see more support measures."

Speculation is growing that policy makers are preparing measures to prop up the world’s second-largest stock market. The Economic Observer reported the government is considering steps to stabilize equities including a reduction in the stamp tax, while the finance ministry said it will allow the pension fund to invest in shares.

The government is considering a delay in the IPO of China Nuclear Engineering Corp., according to people with knowledge of the matter. The delay is being considered because of current market conditions, said the people, who asked not to be identified because the information is private.

Margin debt on the Shanghai Stock Exchange fell for a sixth day on Monday to 1.36 trillion yuan ($219 billion), the longest stretch of declines since June 2014. A five-fold surge in leveraged wagers had helped propel the Shanghai index to a more than 150% gain in the 12 months through 12 June.

The CSI 300 Index of large companies jumped 3.9%, led by rallies for financial, technology and health-care shares. Hong Kong’s Hang Seng Index rose 2.4%. The Hang Seng China Enterprises Index advanced 2.3%.

“I would look to buy blue chips with low valuations like banks and insurers," said Hao Hong, the China equity strategist at Bocom International Holdings Co. in Hong Kong. Bloomberg

With assistance from Zhang Shidong in Shanghai.

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