SHANGHAI shares yesterday rebounded from a four-year low to end a seven-day losing streak as financial stocks climbed after the central bank pledged to adjust liquidity to maintain stability in the money market.

The Shanghai Composite Index advanced 1.5 percent to 1,979.21 points. Even with the gain, the index dropped 13.97 percent this month - the biggest monthly decline since August 2009.

Concern about a liquidity squeeze drove this month's slump as interbank borrowing costs surged to record highs, fueling worries economic growth will slow further.

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

Meanwhile, Zhuang Xinyi, vice chairman of the China Securities Regulatory Commission, said the regulator will strengthen supervision of market irregularities to end false disclosures and better protect investors.

Zhuang also said the CSRC is not a supervisor of market pricing but will do everything it can to ensure a healthy market.

Financial stocks recovered as interbank lending costs fell for a fifth consecutive day, a sign the liquidity crunch is easing.

The Industrial and Commercial Bank of China rallied 5.5 percent, the most since November 2010, to 4.02 yuan (65 US cents).