The Shanghai composite index gained 14.811 points, or 1.12 percent, to close at 1,334.679. The Shenzhen sub-index also went up 34.56 points, or 1.29 percent, to end at 2,722.28.

Shanghai's B-share index ended up 1.92 percent at 114.891 points. Shenzhen's rose 1.55 percent to 189.08. Hard-currency B shares are open to Chinese and foreign investors.

Shares in CITIC Securities' 1.8 billion yuan (US$217 million) initial public offering, the first by a brokerage on the Chinese mainland, closed up a weaker-than-expected 11.3 percent at 5.01 yuan, below analysts' average forecast of a 33 percent rise.

Brokers said IPO investors took quick profits, depressed by a market slump that has seen the benchmark Shanghai composite index - which also includes yuan-denominated A shares - fall 41 per cent from its peak in June 2001.

The index rose 1.12 percent to end at 1,334.679 after hitting an intraday low of 1,311.684, approaching the psychologically important 1,300 level. It is hovering near a three-and-a-half-year low due partly to poor corporate earnings and too many IPOs.

"Recent market trends have shown that there has always been some bargain hunting when the Shanghai composite index nears a key support," said analyst Zhang Yongpan of Guohai Securities.

"The rise today does not mean a market recovery. We expect some decent technical rebounds when prices are really low, when the composite index falls below the key 1,300 level," he said.

The market's focus was on CITIC Securities' much-anticipated debut, which had been expected to pave the way for the country's struggling brokerages to tap share markets, analysts said.

The IPO, priced at 15 times the firm's 2001 earnings, seemed cheap compared to the level of 91 times earnings at which Hong Yuan Securities was trading. Hong Yuan was a trust when it listed in 1994 and it converted to a brokerage in 2000.

But analysts said CITIC Securities' 2001 price-to-earnings ratio was no longer relevant as its net profit had plunged 83 per cent year on year in the first 11 months of 2002.

Zheng Weigang, a senior analyst with Shanghai Securities, said: "In addition to the weak market, CITIC Securities' poor results for 2002 also contributed to its weak debut."

Analysts said near-term prospects for China's 124 brokerages were poor. At least half of them lost money in 2002, hit by the market slump and a cut in stock trading commissions, they said.

Yesterday, investors hunted for bargains in chronic loss-making companies on B-share bourses, brokers said.

The Shanghai-listed chicken breeder Dajiang Group Co was the most active stock and one of the top decliners, closing down 2.93 percent at 42.1 US cents with 3.77 million shares traded.

China's yuan held steady against the US dollar to close at 8.2768 yesterday as hard-currency bids from importers offset dollar offers from export earnings, dealers said.

The yuan was pinned within a tight range, trading at only one other rate of 8.2769. Turnover dipped to US$540 million from Friday's US$570 million.

A dealer at a State-owned bank in Beijing said: "Trade was brisk throughout the session, with most transactions seen at 8.2768."

The exchange rate of the yuan, which is not freely convertible on the capital account, has moved mostly near the strong end of its long-standing 40-notch trading range on the back of China's surging exports, dealers said.

Most Chinese trading firms are required to sell hard-currency earnings to commercial banks designated to trade on the Shanghai-based national foreign-exchange market.

(China Daily January 7, 2003)