SHANGHAI - Chinese share prices surged to close 7.63 per cent higher on Wednesday amid renewed hopes that Beijing will soon act to support the ailing stock market, dealers said.

The key index initially fell as low as 2,306.66 points on lingering concerns over share supply glut, rising inflation pressures and a slowing economy.

But hopes on a near-term economic stimulus package from Beijing sparked a rally in Shanghai and aided other Asian markets despite an overnight decline in Wall Street.

The benchmark Shanghai Composite Index, which covers both A and B shares, was up 178.81 points at 2,523.28 on a turnover of 59.0 billion yuan (8.6 billion US dollars).

The key index saw the biggest single-day percentage gain since April 24 after the government cut the stamp duty. It had fallen around 60 per cent from its peak last October ahead of Wednesday's rally.

"The rally was triggered by market talk that Beijing will launch measures to buoy the market, such as trade on credit, stock index futures or new rules on the sales of previously non-tradeable shares," said Yan Li, an analyst from Southwest Securities.

She said brokers would benefit the most from such measures as it would boost their sales.

The Shanghai A-share index rose 187.71 points, or 7.63 per cent, to close at 2,648.75 on turnover of 58.7 billion yuan, while the Shenzhen A-share index jumped 50.30 points, or 7.21 per cent, to 747.58 on turnover of 26.2 billion yuan.

Referring to the weekly chart of Singapore Straits Times Index (STI), it is going to test the crucial support at 2746 very soon. With the local market in the oversold territory of late, 2746 support level is likely to be a strong one.

But if 2746 were broken down, it will be "all hell break loose". The downtrend will continue, further confirming my belief that The Bear will stay till Oct 2009.

Singapore's Straits Times Index (STI)'s downward slide seems to have found support at 2820 for the time being. But this does not mean STI has bottomed out. If 2820 is broken, it is highly probable that it will head toward 2746 fast.

In the short term, STI is likely to be range bound between 2820 and 2946, the current resistance.

STI's short term support at 2860 was breached this morning, danger is in the air now, with 2746 within reach any time.

Taking cue from Dow Jones Industrial Average's overnight plunge of 236.77 points, Singapore's Straits Times Index (STI) traded lower in tandem this morning, nearing it's next support at 2862.

With so much negative news still lingering in the market, STI looks set to break the 2862 support and heads toward the next strong support at 2746.

The current resistance is at Fibonacci 61.8% Retracement at 2946, but it is a weak one though.