The Shanghai Composite Index rose 0.35 percent to end at 1,524.925 points after hitting an intraday trough of 1,512.327 in the afternoon. The Shenzhen's inched 0.77 points, or 0.02 percent, to 3088.94 points.

Shanghai's hard currency B share index ended up 0.33 percent at 138.202 points, but Shenzhen's edged down 0.39 percent to 210.37 in thin trade. B shares are open to both foreign and Chinese investors.

"There was buying from funds and other institutional investors as the benchmark Shanghai composite index approached the psychologically important 1,500 points," said an analyst with China Securities.

Analysts said there was some technical buying yesterday with the 14-day Relative Strength Index (RSI) having hovered below the oversold mark of 30 since September 26.

But the index is still down by about 8.9 per cent from September 3, pummelled by negative factors including frequent share issues, poor corporate earnings and a government crackdown on market corruption.

A shares in heavyweight China United Telecommunications Corp, which accounts for 2 percent of the composite index, ended up 0.66 percent at 3.03 yuan (36.6 US cents). Unicom also has Hong Kong-listed shares, which closed 0.5 percent higher at HK$5.00 (64.1 US cents).

Analysts said they were not optimistic about the near-term trend, mainly because of a shortfall of market liquidity.

"There have been so many new share issues recently, which has led to a liquidity crunch and greatly hurt investor confidence," said an analyst with MF Securities.

New issues have been announced nearly every day over the past two months. On Monday, major tungsten maker Xiamen Tungsten Co said it planned to issue 30 million domestic A shares on Thursday to raise 348 million yuan (US$42.1 million) for technical upgrades.

Among other looming major initial public offerings, CITIC Securities plans to raise a rough 2.76 billion yuan (US$333.7 million) in the first domestic IPO by a brokerage in China later this month, securities and company sources have said.

"Monday's small volumes showed most investors are not yet prepared to build fresh positions," said an analyst of Pingan Securities.

"They also indicated the markets had not bottomed out. We will not be surprised if the benchmark Shanghai composite index breaches the key 1,500-point support," he said.

Turnover on the B-share markets, for instance, was only US$4.93 million in Shanghai and HK$46.50 million (US$5.96 million) in Shenzhen yesterday.

Brokers said there was also some speculative buying in loss-making companies on the hard currency markets, with travel agency Hainan Dadonghai Tourism, the biggest B-share gainer, ending up 5.15 percent at HK$2.45 (31.4 US cents).

Chinese punters typically speculate in loss makers in hopes that government-orchestrated corporate asset restructurings will help them reverse their fortunes, brokers said.

Reports said on Monday that the China Securities Regulatory Commission is drafting regulations which will allow listed companies to carry out forced buybacks of shares issued to major shareholders owing money to the listed firms.

Currently, the parents of listed companies frequently appropriate funds raised via the listed companies' share issues, and the new regulation would provide listed firms with an avenue to stop the practice, analysts said.

(China Daily October 22, 2002)