Shanghai's B share index inched up 0.10 percent to 125.163 points. Shenzhen's rose 0.60 percent to 203.26. Hard currency B shares are open to foreigners and Chinese.

Chinese punters frequently speculate in loss-making companies in the hope that government-supported corporate asset restructuring will lead to a dramatic reversal of fortunes.

"In many cases, while the markets are recovering Chinese punters prefer to speculate in loss- makers. That is unhealthy for the markets and is creating high risks," said a floor trader at a foreign brokerage in Shanghai.

Shenzhen Petrochemical, which posted the biggest annual loss by a Chinese listed company for 2001, logged the largest gain on the B share market, rising 2.78 percent to HK$2.96 (37.94 US cents). The company is set to report 2002 results on April 23.

In Shanghai, chicken breeder Shanghai Dajiang Group, which lost money in 2000 and 2001, was the most active B share, closing up 0.81 percent to US$0.499 on heavy volume of 9.06 million shares. It will post 2002 results on April 26.

Share prices staged a correction on Tuesday after indices had risen 15 percent this month in a strong technical rebound.

The brief recovery was triggered by hopes that the government would come to the rescue of the sluggish markets, which had fallen more than 40 percent since their peak in 2001.

The decline was sparked by a number of factors, including poor corporate earnings and frequent stock offers.

Officials at the China Securities Regulatory Commission have said they were not aware of immediate changes in policies.

On the yuan-denominated A share markets, open to Chinese and select foreign investors, Shanghai-listed loss-making department store operator Hangzhou Jiebai rose its 10 per cent daily limit up to 6.56 yuan (79.22 US cents).

Another loss maker, Jilin Henghe Pharmaceutical, was the biggest riser on the Shenzhen A share market, surging 6.36 percent to 7.36 yuan (88.88 US cents).

Despite surges in loss-makers, analysts said they saw little potential for share indices to rise ahead of the Spring Festival, China's most important public holiday, when the exchanges will be closed from January 30 to February 7.

"With the Spring Festival approaching, investors will be less enthusiastic to trade," said an analyst of Taiyang Securities. "We expect share indices to move narrowly in the near term."

Analysts said the benchmark Shanghai composite index, which groups A and B shares, was likely to move between 1,430 and 1,500 points ahead of the Spring Festival, or the Lunar New Year.

The composite index ended up 0.39 percent at 1,460.53 points.

Shanghai's A share index closed up 0.39 percent at 1,525.972 points and its Shenzhen counterpart rose 0.60 percent to 441.48.

(China Daily January 23, 2003)