Guangxia, which had been suspended in May over a major profit fraud scandal, surged 15.14 percent to 4.41 yuan (53 US cents) to become the biggest A share gainer on the Shenzhen bourse.

Shanghai's hard currency B share index jumped 1.3 percent to finish at 119.945 points, while Shenzhen's closed up 1.46 percent at 197.09. Turnover in B shares came to nearly US$20 million in Shanghai and HK$97 million (US$12 million) in Shenzhen.

Some analysts were optimistic about the market's trend in the short term.

It recorded recent index gains despite an imminent share offering by CITIC Securities, which said it would raise 1.8 billion yuan (US$217 million) in an offering to be launched today.

Markets have been hit by fears about shrinking liquidity in the face of a full schedule of domestic share offers this year.

The benchmark Shanghai composite index, tracking B and A shares which are open to domestic and select overseas investors, ended 0.83 percent higher at 1,408.515.

"It seems the market has bottomed out at above 1,400 points," said Huatai Securities analyst Zhou Lin.

But other analysts said investors were still cautious and some of them might adopt a wait-and-see attitude for now.

"Although the index was up, there were no special factors that attracted investors, indicating punters still need more good news to boost their confidence," said Ren Chengde, an analyst at Galaxy Securities.

Guangxia's stratospheric rise was a one-off. Its trading range now reverts to a maximum rise or fall of 5 per cent, adhering to guidelines for so-called "Special Treatment" counters in companies that post two straight years of losses.

Stocks that had been punished this year also posted gains.

Linuo Industry Co, based in the central city of Wuhan, was the biggest A share gainer in Shanghai, rising nearly 10 percent to 9.15 yuan (US$1.1).

Despite yesterday's rally, the stock was still down nearly 25 percent since logging its year high in April. By comparison, Shanghai's composite index was off 15.5 per cent since that date, indicating Linuo was oversold, analysts said.

Garment maker Hubei Xingfu Industry Co, which warned investors yesterday its shares would be suspended if it lost money again in 2002, dipped 1.46 percent to 4.06 yuan (US$0.49).

The Shenzhen sub-index closed at 2859.53, up 1.02 percent than on Friday.

Yesterday, Shenzhen Stock Exchange commissioned a new index comprising 100 of its largest and most active stocks, an apparent attempt to present a more accurate picture of overall trade.

Shenzhen's new index would be composed of major firms such as Shenzhen Development Bank, property developer China Vanke and Guangdong Electric Power.

Index components would account for about 40 percent of the Shenzhen bourse's capitalization, 61 per cent of the combined after-tax profits of Shenzhen-listed companies, and 43 percent of turnover.

Turnover in A shares came to 5.1 billion yuan (US$616 million) in Shanghai, a rise of 13 percent, and 3.6 billion yuan (US$434 million) in Shenzhen, up nearly 30 per cent from Friday.

The turnover on the Shanghai market was 5.33 billion yuan (US$644 million), while the figure for the Shenzhen market ended at 3.75 billion yuan (US$453 million).

(China Daily December 17, 2002)