China's shares managed a slight technical rebound for the second consecutive day yesterday, helped by bargain-hunting in the newly listed domestic shares of China Southern Airlines, brokers said.
But they said the rebound was weak and could soon peter out.
The benchmark Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, closed 0.16 percent higher at 1,479.652 points.
Shenzhen's sub-index rose by 0.42 percent to 3,303.16.
Shanghai's hard currency B-share index dipped by 0.16 percent to 112.439 while its Shenzhen equivalent lost 0.19 percent to 228.65.
China Southern, which is also traded in Hong Kong and New York, saw its Shanghai-listed A shares rising 4 percent to 4.08 yuan (US$0.49) on heavy volume of 131 million shares.
It was the day's most active stock and one of its top gainers.
The country's biggest carrier by fleet size made its debut on the domestic market on Friday but had a poor showing, with investors dispirited by a lingering bear market and weak corporate earnings prospects.
Bargain hunters, however, stepped in yesterday because its A shares - trading at around 1.5 times book value - are relatively cheap compared with their domestic rivals such as China Eastern Airlines, brokers said.
"After a few days of sluggishness, China Southern finally staged a good performance and its rise helped the broader market stabilize," said analyst Cao Xuefeng at Huaxi Securities.
The composite index began a weak rebound on Tuesday after falling 4.5 percent since mid-July under pressure from several negative factors including a rash of forthcoming stock offers, which investors fear will drain liquidity from the market.
"Despite the rebound, trading volume was thin and investors were listless, hurt by nagging market bearishness," said analyst Pei Xiaoyan at United Securities.
"We see no signs that the market will be able to get rid of its recent weakness soon," he said.
Analysts said they saw more downside potential over the next few days, but expected the Shanghai composite index to find support at the psychologically important 1,450-point level.
China Eastern's A shares closed up 2.11 percent at 4.35 yuan (US$0.524) after the company said yesterday its passenger revenue in July doubled from June to more than 800 million yuan (US$96.7 million).
But Hainan Airlines bucked yesterday's market rise to become one of the biggest B share decliners with a 1.44-percent fall to US$0.616.
The firm, owned partly by global financier George Soros, said yesterday it expects to post a first-half loss as the outbreak of SARS had hit its business.
On the foreign exchange market, China's yuan firmed two notches to close at 8.2773 to the dollar yesterday, keeping its grip at the stronger end of the tightly managed trading range.
The yuan traded between 8.2770 and 8.2774 throughout the session. The central People's Bank of China usually enforces a trading band of 8.2760 to 8.2800.
Turnover, US$330 million on Tuesday, was not immediately available.
US Treasury Secretary John Snow said on Tuesday he wants to engage China on the subject of widening the trading band for the yuan, a target of ire for American manufacturers.
China is facing pressure from foreign countries, including the United States, Japan and South Korea, to revalue the currency.
The yuan firmed yesterday to 6.9042 against 100 Japanese yen from 6.9443, and strengthened versus the euro to 9.4676 from 9.5115. It also gained versus the Hong Kong dollar to 1.0610 from 1.0613.
(China Daily July 31, 2003)
