SHANGHAI stocks rallied this morning after China's central bank governor Zhou Xiaochuan pledged to adjust liquidity supply to maintain the stability of the money market.

The benchmark Shanghai Composite Index gained 15.26 points, or 0.78 percent, to 1,965.28. Turnover was 44.5 billion yuan (US$7.3 billion) by midday.

"The People's Bank of China will employ various tools and measures to adjust market liquidity and ensure market stability while continuing its moderate monetary policy," Zhou told the Lujiazui Forum in Shanghai this morning.

Financials recovered as the interbank lending costs fell for a fifth consecutive day, a sign of easing liquidity crunch.

China Minsheng Banking Corp rose 2.3 percent to 8.40 yuan. Industrial Bank Co gained 3.5 percent to 14.63 yuan. Shanghai Pudong Development Bank Co added 2.3 percent to 8.06 yuan.

Property developers led the market up as The 21st Century Business Herald said the China Securities Regulatory Commission may relax control on the refinancing by homebuilders.

Poly Real Estate, China's second-largest developer, surged 6.8 percent to 9.96 yuan. Gemdale Corp rose 6.5 percent to 6.85 yuan.