Chinese shares bounced back from the heaviest losses in 10 years Wednesday, as the major index gained 3.94 percent.

The benchmark Shanghai Composite Index, which tracks both A- and B-shares, surged 3.94 percent, or 109 points to closed at 2,881.07 points.

The component index of the smaller Shenzhen Stock Exchange jumped 3.19 percent, or 248 points, to end at 8,039.70 points. Turnover on the two bourses totaled 136.08 billion yuan (17.01 billion U.S. dollars).

Erasing the downward trend of Tuesday, nearly 1,200 stocks on the two bourses reported growth, and around 200 of them saw their prices surging 10 percent, the ceiling for a trading day.

Boosted by market heavyweights, banking and securities stocks rebounded from previous loses. Share prices of the Industrial and Commercial Bank of China, Bank of China and China Life rose 4.48 percent, 3.68 percent and 5.84 percent, respectively.

Stocks in sectors including metals, forestry and stock-breeding all gained.

Securities analysts said the culprit behind the "Black Tuesday" panic was a rumor that China is to levy capital gains tax on retail equity investors.

However, as the Ministry of Finance and the State Administration of Taxation blew out the rumor, Chinese shares regained their momentum with the recovery of investors' confidence.

Chinese shares slumped sharply on profit-taking on Tuesday, with the benchmark Shanghai Composite Index plunged 8.84 percent to closed at 2,771.79 points, the biggest daily dive since Feb. 18 in 1997 when the index dropped 8.91 percent.

Source: Xinhua