Investors bought into firms which had posted poor results, such as construction materials maker Fangda Co, betting they had engineered a turnaround over the full year.

Shanghai's B share index ended up 0.95 percent at 116.18 points after having risen 2.2 percent at one point.

Shenzhen B shares edged up 0.53 percent to close at 191.67 after rising 1.47 percent. Hard currency B shares are open to foreigners and Chinese citizens.

Analysts said they expected narrow movements in the near future.

"We see little chance for share indices to fall further in the near term," said analyst Qian Weihai of Jinxin Securities.

"But a liquidity shortage at year end will prevent decent gains and investors have to wait for the new year for a possible market recovery."

Yesterday's rebound was triggered by a report in the Securities Times, which quoted Southeast Securities, as predicting more than half of China's 112 B share companies would see a steep earnings rise this year due to robust economic growth.

"There will be no companies which will report huge losses like last year," the newspaper said.

Shenzhen-listed Fangda, which posted a net loss in the first half of this year, was yesterday's star performer on the B share markets, closing up 4.08 percent at HK$3.57 (US$0.473) as investors banked on its earnings improving over the whole of 2002, brokers said.

Shanghai Automation Instrument Co was the biggest gainer in Shanghai with a rise of 2.85 percent to US$0.469. The industrial equipment maker was barely in the black in 2001 after posting heavy losses in 2000.

Chinese punters typically speculate on poor earners in hopes that government-sponsored restructurings will help them show dramatic reversals of fortune.

"The rebound lost steam late in the session as market sentiment was weak after a nagging downtrend and due to a lack of liquidity as the year end is approaching," said Simon Lai, analyst at Shenyin & Wanguo Securities.

Liquidity is usually tight near the end of the year as many brokerages cash in shares in preparation for book closing.

Brokers said B share gains also sparked broader buying. The benchmark Shanghai composite index, which also includes yuan-denominated A shares, rose 0.34 percent to 1,383.91 points.

Despite the rise, the index is down 38 percent since a peak in June last year, partly because investors worried about corporate health during a government crackdown on market corruption.

Shenzhen's sub-index climbed 9.21 points, or 0.33 percent, to 2,806.01.

(China Daily December 13, 2002)